The maximum amount you can contribute to a 401(k) plan each year depends on your age and whether your employer offers matching contributions. For 2023, the maximum contribution limit is $22,500 for individuals under age 50 and $30,000 for those who are 50 or older. If your employer offers matching contributions, you may be able to contribute more to your 401(k) plan, up to the overall limit of $66,000 ($73,500 for those age 50 or older). It’s important to note that the employer matching contributions do not count toward your individual contribution limit.
Annual Contribution Limits
The maximum amount you can contribute to your 401(k) plan each year is set by the IRS and adjusted periodically to keep pace with inflation. For 2023, the contribution limit is $22,500. If you’re age 50 or older, you can make an additional catch-up contribution of $7,500, bringing your total contribution limit to $30,000.
Employer Matching Contributions
- Employer matching contributions do not count towards your annual contribution limit.
- However, they do reduce the amount of money you can contribute on a pre-tax basis.
- For example, if your employer matches 50% of your contributions up to 6%, your maximum pre-tax contribution would be $19,500.
Contribution Limits for Different Types of 401(k) Plans
The contribution limits for 401(k) plans vary depending on the type of plan you have.
| Plan Type | Contribution Limit |
|---|---|
| Traditional 401(k) | $22,500 |
| Roth 401(k) | $22,500 |
| SIMPLE 401(k) | $15,500 |
: 401k basics
The Max Contribution to a 401k
A 401k is a retirement savings plan offered by many employers in the United States. It allows employees to save for retirement on a pre-tax basis.
The maximum amount of money that can be contributed to a 401k in 2023 is $22,500. This limit is set by the Internal Revenue Service (IRS) and is adjusted each year for inflation. In addition to the regular contribution limit, employees who are age 50 or older can make catch-up contributions of up to $7,500 in 2023.
Catch-up Contributions
Catch-up contributions are additional contributions that employees who are age 50 or older can make to their 401k accounts. These contributions are not subject to the regular contribution limit, and they can help employees save more for retirement.
- The catch-up contribution limit for 2023 is $7,500.
- Employees who are age 50 or older can make catch-up contributions to both their traditional and Roth 401k accounts.
- Catch-up contributions must be made on a pre-tax basis.
The following table summarizes the 401k contribution limits for 2023:
| Type of Contribution | Regular Limit | Catch-up Limit (Age 50 or Older) |
|---|---|---|
| Traditional 401k | $22,500 | $7,500 |
| Roth 401k | $22,500 | $7,500 |
Max Contribution to a 401k
The maximum amount you can contribute to a 401k plan varies depending on your income and the type of plan you have. In 2023, the contribution limit for traditional and Roth 401k plans is $22,500. However, if you are age 50 or older, you can make catch-up contributions of up to $7,500, bringing your total contribution limit to $30,000.
In addition to the employee contribution limit, employers can also make matching contributions to their employees’ 401k plans. The maximum employer matching contribution limit is 100% of the employee’s compensation, up to a maximum of $66,000 in 2023. However, there are some income limitations that apply to employer matching contributions.
Income Limitations
- For traditional 401k plans, the employer matching contribution limit is reduced by 50% for employees who earn more than $265,000 ($414,000 for married filing jointly). This means that the maximum employer matching contribution for highly compensated employees is $33,000 in 2023.
- For Roth 401k plans, there is no income limit for employer matching contributions. However, employees who earn more than $145,000 ($218,000 for married filing jointly) are not eligible to make Roth 401k contributions.
It is important to note that the income limits for 401k contributions are based on your modified adjusted gross income (MAGI). MAGI is similar to your taxable income, but it includes some additional items, such as foreign income and certain tax-exempt interest.
If you are not sure whether you are eligible to make 401k contributions, you should contact your employer or a financial advisor.
| Year | Employee Contribution Limit | Employer Matching Contribution Limit |
|---|---|---|
| 2023 | $22,500 | 100% of compensation, up to $66,000 |
| 2022 | $20,500 | 100% of compensation, up to $61,000 |
| 2021 | $19,500 | 100% of compensation, up to $58,000 |
I hope this was helpful and gave you a clearer understanding of 401k contribution limits. Whether you’re just starting your retirement savings journey or looking to maximize your contributions, every dollar you put in now can make a big difference down the road. So, keep saving, keep investing, and happy planning!
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