401k contribution limits refer to the maximum amount of money an individual can contribute to their 401k retirement plan each year. These limits are set by the Internal Revenue Service (IRS) and are subject to change annually. The limits are designed to encourage individuals to save for retirement while also ensuring that the tax benefits of 401k plans are not abused.
2023 Contribution Limits for Employees
The Internal Revenue Service (IRS) sets annual limits on how much money you can contribute to your 401(k) plan. For 2023, the contribution limits are as follows:
- Employee elective deferrals: $22,500 (up from $20,500 in 2022)
- Catch-up contributions for participants age 50 or older: $7,500 (unchanged from 2022)
In addition to these limits, employers can make matching contributions to their employees’ 401(k) plans. The maximum amount that an employer can contribute on behalf of an employee is 100% of the employee’s compensation, or $66,000 (up from $61,000 in 2022), including the employee’s elective deferrals.
| Contribution Type | 2023 Limit |
|---|---|
| Employee elective deferrals | $22,500 |
| Catch-up contributions | $7,500 |
| Employer matching contributions | 100% of compensation, or $66,000 |
401k Contribution Limits
401(k) plans are retirement savings plans offered by many employers in the United States. They allow employees to save a portion of their paycheck on a pre-tax basis, reducing their current taxable income. The money saved in a 401(k) plan grows tax-deferred until it is withdrawn in retirement, when it is taxed as ordinary income.
Contribution Limits
The amount that you can contribute to a 401(k) plan is limited by the IRS each year. For 2023, the contribution limits are as follows:
Employee Elective Deferrals
- $22,500 (plus a catch-up contribution limit of $7,500 for individuals age 50 or older)
Employer Matching Contributions
- Up to 100% of the employee’s elective deferrals, or
- $66,000, including the employee’s elective deferrals (plus a catch-up contribution limit of $11,000 for individuals age 50 or older)
It’s important to note that the employee elective deferral limit and the employer matching contribution limit are separate limits. This means that an employer can contribute up to the full amount of the matching contribution limit, regardless of how much the employee contributes.
Table of 401(k) Contribution Limits
| Contribution Type | 2023 Limit |
|---|---|
| Employee Elective Deferrals | $22,500 |
| Employer Matching Contributions | Up to 100% of employee’s elective deferrals, or $66,000 |
| Total Contributions (including employer match) | $66,000 |
| Catch-up Contribution Limit (age 50 or older) | $7,500 for employee elective deferrals, $11,000 for employer matching contributions |
Maximum 401k Contribution Limits
A 401k is a tax-advantaged retirement savings plan offered by many employers. Contributions to a 401k are deducted from an employee’s paycheck before taxes, reducing their taxable income. The money in a 401k grows tax-deferred until it is withdrawn in retirement.
The IRS sets annual limits on how much can be contributed to a 401k plan. These limits are adjusted each year for inflation. For 2023, the contribution limits are as follows:
| Contribution Type | Limit |
|---|---|
| Employee Elective Deferrals | $22,500 |
| Employer Matching Contributions | 100% of employee deferrals, up to 25% of employee’s compensation |
| Total Contributions (employee and employer) | $66,000 |
Catch-up Contributions for Older Workers
Individuals aged 50 and older are eligible to make catch-up contributions to their 401k plans. The catch-up contribution limit for 2023 is $7,500.
To be eligible for catch-up contributions, you must meet the following requirements:
- Be at least 50 years old
- Participate in an employer-sponsored 401k plan
- Have less than $1 million in your 401k plan (or $2 million if married filing jointly)
Catch-up contributions are a great way to save more for retirement and take advantage of the tax benefits of a 401k plan.
401k Contribution Limits
401(k) plans are employer-sponsored retirement savings plans that allow employees to save for retirement on a tax-advantaged basis. Employees can contribute a portion of their paycheck on a pre-tax basis, which reduces their current income and the amount of taxes they owe.
There are annual limits on how much you can contribute to your 401(k) plan. For 2023, the contribution limit is $22,500. This limit applies to both employee contributions and employer matching contributions.
Special Contribution Limits for Certain Participants
There are special contribution limits for certain participants.
- Catch-up contributions: Employees who are age 50 or older can make catch-up contributions of up to $7,500 in 2023. This is in addition to the regular contribution limit.
- Military catch-up contributions: Members of the military who are deployed to a combat zone or other hazardous duty area can make catch-up contributions of up to $2,000 per year, regardless of their age.
The table below summarizes the contribution limits for 401(k) plans.
| Participant | Regular Contribution Limit | Catch-up Contribution Limit |
|---|---|---|
| Employee under age 50 | $22,500 | N/A |
| Employee age 50 or older | $22,500 | $7,500 |
| Military member deployed to a combat zone or other hazardous duty area | $22,500 | $2,000 |
Hey there, folks! Thanks for taking the time to learn about 401k contribution limits. If you’ve got any more questions or just want to chat about investing, feel free to come on back anytime. I’ll be here with my trusty Excel spreadsheets, ready to spill the beans on all things retirement savings. See ya later, friends!