The maximum amount you can contribute to a 401(k) plan for 2023 is $22,500. This limit applies to both employee and employer contributions. If you’re age 50 or older, you can make catch-up contributions of up to $7,500 in 2023. This means that the total amount you can contribute to your 401(k) plan for 2023 is $30,000. These limits are set by the IRS and are subject to change each year. It’s important to note that the max contribution limit is for the total amount you contribute, including both employee and employer contributions. So, if your employer contributes $6,000 to your 401(k) plan, your personal contribution limit would be reduced to $16,500.
Annual Contribution Limits
The maximum amount you can contribute to a 401(k) plan each year is set by the Internal Revenue Service (IRS). These limits are adjusted periodically to keep pace with inflation.
2023 Contribution Limits
- Employee: $22,500
- Catch-up contributions (age 50 or older): $7,500
- Total: $30,000
In addition to these employee contributions, employers may also make matching or profit-sharing contributions. The total amount of all contributions to your 401(k) plan cannot exceed the lesser of:
- $66,000 ($73,500 including catch-up contributions)
- 100% of your compensation
2024 Contribution Limits
The IRS has not yet announced the 2024 contribution limits. However, they are expected to be slightly higher than the 2023 limits.
2023 401(k) Contribution Limits Contribution Type Employee Employer Total Employee $22,500 — $22,500 Catch-up (age 50 or older) $7,500 — $7,500 Employer Match — $66,000 $66,000 Profit Sharing — $66,000 $66,000 Total $30,000 $66,000 $106,000 401(k) Contribution Limits and Employer Matching
401(k) plans are defined contribution retirement accounts that allow employees to save for retirement on a tax-advantaged basis. There are limits on how much money you can contribute to a 401(k) plan each year. These limits are set by the Internal Revenue Service (IRS) and are adjusted annually for inflation.
Employee Contribution Limits
- For 2023, the employee contribution limit is $22,500.
- For individuals age 50 or older, the catch-up contribution limit is an additional $7,500, bringing the total contribution limit to $30,000.
Employer Matching Contributions
Many employers offer matching contributions to their employees’ 401(k) plans. This means that the employer will contribute a certain amount of money to your account, up to a certain limit, for every dollar that you contribute. Employer matching contributions are not considered part of your employee contribution limit.
The amount of the employer match varies from plan to plan. Some plans offer a 100% match up to a certain limit, while others offer a 50% match or a flat dollar amount. Some plans also have vesting schedules, which means that you may not be able to keep all of the employer matching contributions until you have been with the company for a certain period of time.
Combined Contribution Limits
The combined employee and employer contribution limit for 401(k) plans is $66,000 for 2023.
This limit does not include catch-up contributions for individuals age 50 or older. For these individuals, the combined contribution limit is $73,500.
Contribution Type 2023 Limit Employee Contribution $22,500 Catch-Up Contribution (age 50+) $7,500 Employer Matching Contribution $41,000 Combined Contribution Limit $66,000 Are There Max 401k Contributions?
Yes, for 2023 the maximum amount that can be contributed to a 401(k) plan is $22,500. If you are 50 or older, you can contribute an additional $7,500 for a total of $30,000.
These limits apply to both employee and employer contributions. However, some employers may choose to make matching contributions that are not subject to the limit.
Catch-up Contributions for Age 50+
If you are age 50 or older, you can contribute an additional $7,500 to your 401(k) plan each year. This is known as a catch-up contribution.
Catch-up contributions are a great way to save more for retirement. However, they are not available to everyone. To be eligible for catch-up contributions, you must meet the following requirements:
- You must be at least 50 years old.
- You must have participated in a 401(k) plan for at least one year.
- Your employer must offer a catch-up contribution program.
If you meet these requirements, you can contribute up to $7,500 in catch-up contributions each year. This amount is in addition to the regular 401(k) contribution limit.
## Aggregation Rules for 401(k) Contributions
The maximum 401(k) contribution limit for 2023 is $22,500 ($30,000 for individuals age 50 or older). However, this limit applies to your contributions across all of your employers.
**Components of the Contribution Limit**
The overall 401(k) contribution limit includes both your elective deferrals (employee contributions) and your employer’s matching and nonelective contributions.
**Aggregation Rules**
If you participate in 401(k) plans at multiple employers, your contributions are aggregated to determine if you exceed the limit. This includes contributions made by both you and your employers.
**Consequences of Exceeding the Limit**
If you exceed the 401(k) contribution limit, the excess contributions will be subject to a 6% excise tax (payable by the employee) for the year the excess is contributed and each subsequent year until the excess is withdrawn.
**Table of Aggregation Rules**
| Scenario | Aggregation |
|—|—|
| Two unrelated employers | Yes |
| Controlled group of employers | Yes |
| Employee with multiple employers | Yes |
| Employer with multiple 401(k) plans | No |
Well, there you have it, folks! The realm of 401k contributions has been demystified. Now you know there’s a limit to how much you can stash away for retirement. Don’t let this discourage you though, it’s still a fantastic way to secure your golden years. So, put your hard-earned money to work and make the most of this retirement savings vehicle. Thanks for reading, and don’t be a stranger! Swing by again soon for more enlightening financial tidbits and strategies to help you navigate the world of money like a boss.