The amount you can contribute to your 401(k) plan depends on a few factors, including your age and income. For 2023, the maximum you can contribute is $22,500. If you’re 50 or older, you can make an additional catch-up contribution of $7,500. Your employer may also make matching contributions to your plan, which can reduce the amount you need to contribute to reach your retirement goals.
Annual Contribution Limits
The annual limits for 401(k) contributions vary depending on your age and income. Here’s a breakdown:
- Regular Contributions:
- For 2023: Up to $22,500 (plus a catch-up contribution limit of $7,500 for individuals age 50 and older)
- For 2024: Up to $23,500 (plus a catch-up contribution limit of $8,000 for individuals age 50 and older)
Employer Matching Contributions:
In addition to regular contributions, employers may choose to match a portion of your contributions, up to the following limits:
| Year | Limit |
|---|---|
| 2023 | 30% of your compensation or $7,500 |
| 2024 | 30% of your compensation or $8,000 |
Catch-Up Contributions:
Individuals age 50 and older can make additional catch-up contributions to maximize their retirement savings:
- For 2023: Up to $7,500
- For 2024: Up to $8,000
401k Contribution Limits for 2023
A 401(k) plan is a retirement savings plan offered by many employers. It allows employees to contribute a portion of their paycheck to a tax-advantaged account. Contributions to a 401(k) are made on a pre-tax basis, meaning they are deducted from your paycheck before taxes are calculated. This reduces your taxable income, which can save you money on your taxes. Contributions to a 401(k) are subject to annual contribution limits.
Contribution Limit
The maximum amount you can contribute to a 401(k) plan in 2023 is $22,500. This is up from $20,500 in 2022.
Employer Matching Contributions
Many employers offer matching contributions to their employees’ 401(k) plans. Matching contributions are essentially free money from your employer, so it’s important to take advantage of them if you can. The amount of matching contributions you receive will vary depending on your employer’s plan. Some employers may match a certain percentage of your contributions, up to a certain limit. Others may only match a certain dollar amount per year.
- Calculate Your Contribution Limit
- Determine the Type of Plan
- Consider Employer Matching
- Maximize Your Contributions
Contribution Limits for Employees Over Age 50
If you are age 50 or older, you are eligible to make catch-up contributions to your 401(k) plan. Catch-up contributions are additional contributions that can be made above the regular contribution limit. The catch-up contribution limit for 2023 is $7,500.
| Age | Contribution Limit | Catch-up Contribution Limit |
|---|---|---|
| Under 50 | $22,500 | $0 |
| 50+ | $22,500 | $7,500 |
How Much Can I Contribute to My 401(k)?
The amount you can contribute to your 401(k) plan depends on several factors, including your age and income. For 2023, the contribution limits are as follows:
- Employee contribution limit: $22,500
- Employer match limit: $66,000 (including employee contributions)
Catch-Up Contributions for Older Savers
If you’re age 50 or older, you can make additional “catch-up” contributions to your 401(k). For 2023, the catch-up contribution limit is $7,500.
Contribution Limits by Age
| Age | Contribution Limit | Catch-Up Contribution Limit |
|—|—|—|
| Under 50 | $22,500 | N/A |
| 50 or older | $22,500 | $7,500 |
Contribution Limits for 401(k) Plans
401(k) plans are tax-advantaged retirement savings accounts offered by many employers. Individuals can contribute a portion of their pre-tax income to these plans, reducing their current taxable income. The amount that individuals can contribute to their 401(k) plans is subject to annual limits set by the Internal Revenue Service (IRS).
For 2023, the contribution limit is $22,500 for employees under age 50 and $30,000 for employees who are age 50 or older. Employers may also make matching contributions to their employees’ 401(k) plans, within certain limits.
Special Rules for Highly Compensated Employees
- Highly compensated employees (HCEs) are those who earn more than a specified amount per year.
- For 2023, the HCE threshold is $150,000.
- HCEs may be subject to special contribution limits and nondiscrimination testing.
Nondiscrimination testing is a process that ensures that 401(k) plans are not disproportionately benefiting HCEs. If a 401(k) plan fails nondiscrimination testing, the IRS may impose penalties on the plan sponsor.
Contribution Limits for HCEs
The contribution limits for HCEs are based on the average deferral rate (ADR) of non-highly compensated employees (NHCEs) in the plan.
The following table shows the HCE contribution limits for 2023, based on the ADR of NHCEs:
| ADR of NHCEs | HCE Contribution Limit |
|---|---|
| 0% or more | $66,000 |
| 1% or more | $63,500 |
| 2% or more | $61,000 |
| 3% or more | $58,500 |
| 4% or more | $56,000 |
| 5% or more | $53,500 |
| 6% or more | $51,000 |
If the ADR of NHCEs is less than 0%, the HCE contribution limit is $51,000.
Well folks, that’s all the 401(k) wisdom we have for today. We know, it’s a lot to take in, but you’ll be a 401(k) master in no time. Remember, it’s never too late to start saving for your future, and your 401(k) is one of the best tools to help you get there. So, max out that contribution, ride the stock market roller coaster (stay calm, it’s just a ride!), and keep an eye out for any extra cash you can put towards your retirement nest egg. Thanks for dropping by, and be sure to visit again later when you have more burning 401(k) questions!