The maximum amount you can contribute to a 401(k) plan in 2023 is $22,500. This limit applies to both employee contributions (made before taxes) and employer contributions (made by your employer). If you’re age 50 or older, you can make an additional catch-up contribution of $7,500. The maximum contribution limits are set by the IRS and are subject to change each year. It’s important to note that these limits are just that: limits. You’re not required to contribute the maximum amount, and you can choose to contribute less if you prefer.
Plan Types and Contribution Limits
The maximum amount you can contribute to your 401(k) plan depends on the type of plan you have and your age.
Traditional 401(k) Plans
For traditional 401(k) plans, the contribution limit for 2023 is $22,500. This limit is the same for both employee and employer contributions.
Roth 401(k) Plans
For Roth 401(k) plans, the contribution limit for 2023 is also $22,500. However, unlike traditional 401(k) plans, Roth 401(k) plans are funded with after-tax dollars. This means that you will not receive a tax deduction for your contributions, but your withdrawals in retirement will be tax-free.
Catch-Up Contributions
If you are age 50 or older, you can make additional catch-up contributions to your 401(k) plan. The catch-up contribution limit for 2023 is $7,500.
The table below summarizes the 401(k) contribution limits for 2023:
| Plan Type | Contribution Limit | Catch-Up Contribution Limit |
|---|---|---|
| Traditional 401(k) | $22,500 | $7,500 |
| Roth 401(k) | $22,500 | $7,500 |
It is important to note that the contribution limits are set by the IRS and may change from year to year. You should always consult with your plan administrator to determine the exact contribution limits for your plan.
The Maximum 401(k) Contribution
The maximum amount you can contribute to your 401(k) plan each year is determined by the Internal Revenue Service (IRS). For 2023, the limit is $22,500 (up from $20,500 in 2022). If you’re age 50 or older, you can make an additional catch-up contribution of $7,500 (up from $6,500 in 2022). This brings the total maximum contribution for individuals age 50 or older to $30,000. Certain high-income earners may be subject to lower contribution limits.
Employer Matching
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 plan for every dollar you contribute, up to a certain limit. For example, your employer may offer a 50% match, meaning that they will contribute $0.50 to your plan for every $1.00 you contribute.
Employer matching contributions are a great way to save even more money for retirement. However, it’s important to remember that employer matching contributions are not guaranteed. Your employer can change or eliminate the matching contribution at any time.
Profit Sharing
Some employers also offer profit-sharing plans. These plans allow employers to contribute a portion of their profits to their employees’ retirement plans. The amount of the contribution is determined by the employer and can vary from year to year.
Profit-sharing contributions are a great way to save even more money for retirement. However, it’s important to remember that profit-sharing contributions are not guaranteed. The amount of the contribution can vary from year to year, and the employer can eliminate the plan at any time.
| Type of Contribution | Limit for 2023 |
|---|---|
| Employee Contribution | $22,500 ($30,000 for individuals age 50 or older) |
| Employer Matching Contribution | Up to 100% of the employee’s contribution, or 25% of the employee’s compensation |
| Profit Sharing Contribution | Up to 25% of the employee’s compensation |
The Maximum 401k Contribution
The maximum amount you can contribute to your 401(k) plan is set each year by the IRS. For 2023, the maximum contribution limit is $22,500. This limit applies to both employee and employer contributions, so the most you can contribute to your 401(k) plan this year is $58,000.
The maximum contribution limit is indexed for inflation, so it increases each year. In 2022, the maximum contribution limit was $20,500, and in 2021, it was $19,500.
Catch-Up Contributions for Older Individuals
Individuals who are age 50 or older can make catch-up contributions to their 401(k) plans. The catch-up contribution limit for 2023 is $7,500. This means that individuals who are age 50 or older can contribute up to $30,000 to their 401(k) plans this year.
| Age | Maximum Contribution |
|---|---|
| Under 50 | $22,500 |
| 50 or older | $30,000 |
Limitations for Highly Compensated Employees
Highly compensated employees (HCEs) are subject to special contribution limits for 401(k) plans. In 2023, the maximum 401(k) contribution limit for HCEs is $66,000 (including catch-up contributions). However, this limit is reduced by the amount of any employee contributions made to the plan.
For example, if an HCE earns $100,000 and contributes $10,000 to their 401(k) plan, their maximum employer contribution limit would be $56,000 ($66,000 – $10,000). This is because the total combined contributions from the employee and employer cannot exceed the annual limit.
The following table provides a summary of the 401(k) contribution limits for HCEs in 2023:
| Contribution Type | Limit |
|---|---|
| Employee Contributions | $22,500 |
| Employer Contributions | $66,000 (reduced by employee contributions) |
| Catch-up Contributions (age 50 or older) | $7,500 |
| Total Combined Contributions | $66,000 |
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