Fidelity Investments is a financial services company that offers a variety of investment products, including 401(k) plans. 401(k) plans are retirement savings accounts that allow employees to save money for retirement on a tax-advantaged basis. Employees can contribute to their 401(k) plans through payroll deductions, and employers may also make matching contributions. Fidelity will stop accepting 401(k) contributions once an employee reaches the annual contribution limit. For 2023, the annual contribution limit for 401(k) plans is $22,500 ($30,000 for those age 50 or older). If an employee contributes more than the annual limit, the excess contributions will be returned to the employee.
## 401k Limits
The IRS sets annual limits on how much you can contribute to your 401k account. For 2023, the contribution limits are as follows:
* **Employee contributions:** $22,500 (plus a catch-up contribution of $7,500 for those age 50 and older)
* **Employer contributions:** $66,000 (plus a catch-up contribution of $10,000 for those age 50 and older)
## What Happens if You Contribute Too Much?
If you contribute too much to your 401k, the excess contributions will be taxed as income. Additionally, you may have to pay a 6% excise tax on the excess amount.
## How to Avoid Contributing Too Much
There are a few things you can do to avoid contributing too much to your 401k:
* **Monitor your contributions:** Keep track of how much you contribute to your 401k each year. You can do this by checking your pay statements or online account.
* **Talk to your employer:** If you are concerned that you may be contributing too much, talk to your employer. They can help you calculate your contribution limits and adjust your contributions accordingly.
* **Consider other saving options:** If you are unable to contribute the maximum amount to your 401k, consider other saving options such as IRAs or Roth IRAs.
## Table: 401k Contribution Limits
| Year | Employee Contribution Limit | Employer Contribution Limit |
| — | — | — |
| 2023 | $22,500 | $66,000 |
| 2022 | $20,500 | $61,000 |
| 2021 | $19,500 | $58,000 |
401k Contribution Limits: Employer’s Role
Employers play a crucial role in facilitating and managing 401k contributions. Here’s an overview of their responsibilities:
- Establishing the Plan: Employers establish the 401k plan, outlining contribution limits and eligibility requirements.
- Matching Contributions: Some employers offer matching contributions. Employers typically have discretion in setting the matching rate and terms.
- Payroll Deductions: Employers process employee payroll deductions for 401k contributions.
- Plan Administration: Employers administer the 401k plan, including maintaining records and providing participant information.
Regarding contribution limits, employers are responsible for ensuring that employee contributions do not exceed the annual limit set by the IRS.
| Contribution Type | 2023 Limit | Employer’s Role |
|---|---|---|
| Employee Contributions | $22,500 ($30,000 for those age 50+) | Process payroll deductions |
| Employer Matching Contributions | 100% of employee compensation up to the limit | Set matching rate and process contributions |
Fidelity’s 401(k) Contribution Policies
Fidelity Investments, one of the largest providers of retirement plans in the United States, offers a wide range of 401 (k) plans to its clients. Fidelity’s contribution policies vary depending on the type of plan, but generally, employees are able to contribute up to the annual limit set by the Internal Revenue Service (IRS).
Contribution Limits for 2023
- Employee Elective Deferrals: $22,500
- Catch-up Contributions (age 50 or older): $7,500
- Employer Matching Contributions: No limit
- Profit-Sharing Contributions: No limit
In addition to the IRS limits, Fidelity may also impose its own limits on contributions. For example, some Fidelity plans may limit the amount of money that employees can contribute on an after-tax basis.
How to Make Contributions
Employees can make contributions to their Fidelity 401(k) plan through payroll deductions or direct deposits. Employees can choose to contribute a fixed amount each pay period or a percentage of their salary.
Fidelity offers a variety of investment options for 401(k) participants, including:
- Mutual funds
- Exchange-traded funds (ETFs)
- Target-date funds
Employer Matching Contributions
Many employers offer matching contributions to their employees’ 401(k) plans. Matching contributions are a great way to boost your retirement savings. Fidelity will automatically contribute matching funds to your account if you are eligible.
The amount of matching contributions that you receive depends on the terms of your employer’s plan. Some employers match every dollar that you contribute, up to a certain limit. Other employers may only match a percentage of your contributions.
Benefits of Contributing to a 401(k) Plan
There are many benefits to contributing to a 401(k) plan, including:
- Tax-deferred growth: Money that you contribute to a 401(k) plan grows tax-deferred. This means that you will not pay taxes on your earnings until you withdraw the money in retirement.
- Employer matching contributions: Many employers offer matching contributions to their employees’ 401(k) plans. Matching contributions are a great way to boost your retirement savings.
- Reduced taxable income: Contributions to a 401(k) plan reduce your taxable income for the year. This can save you money on your taxes.
- No income limits: There are no income limits for contributing to a 401(k) plan. This means that everyone is eligible to contribute, regardless of their income.
Contributing to a 401(k) Plan After You Leave Your Job
If you leave your job, you can still keep your 401(k) plan with Fidelity. You may have several options, including:
- Leaving your money in the plan: You can leave your money in your 401(k) plan even if you leave your job. However, you will not be able to make any more contributions to the plan.
- Rolling over your money to an IRA: You can roll over your 401(k) money to an individual retirement account (IRA). This allows you to keep your money invested and growing tax-deferred.
- Taking a distribution: You can take a distribution from your 401(k) plan. However, you will have to pay taxes on the money that you withdraw.
| Plan Type | Employee Elective Deferrals | Catch-Up Contributions | Employer Matching Contributions | Profit-Sharing Contributions |
|---|---|---|---|---|
| Traditional 401(k) | $22,500 | $7,500 | No Limit | No Limit |
| Roth 401(k) | $22,500 | $7,500 | No Limit | No Limit |
| SIMPLE IRA | $15,500 | $3,500 | No Limit | No Limit |
Impact of Reaching the Contribution Limit
When you reach the annual 401(k) contribution limit, Fidelity, like other financial institutions, will automatically stop accepting additional contributions. For 2023, the contribution limit is $22,500 for employees under age 50 and $30,000 for those age 50 and older (catch-up contributions).
Consequences of Exceeding the Limit:
* Excess contributions are taxed: Contributions above the limit are subject to an excise tax of 6% each year they remain in the account.
* Withdrawal penalty: If you withdraw the excess contributions prior to age 59½, you may be subject to a 10% early withdrawal penalty.
To avoid these penalties, it is crucial to monitor your contributions and ensure they do not exceed the limit. Here are some tips:
- Track your contributions: Use Fidelity’s online tools or statements to monitor your contributions throughout the year.
- Adjust payroll withholdings: If you are contributing via your paycheck, consider adjusting your withholdings to ensure you do not exceed the limit.
- Use a different retirement savings option: Explore other retirement savings options, such as IRAs or HSAs, if you wish to contribute more beyond the 401(k) limit.
Contribution Limits:
| Year | Age 50 and Under | Age 50 and Older |
|---|---|---|
| 2023 | $22,500 | $30,000 |
| 2024 | $23,500 | $31,500 |
| 2025 | $24,500 | $32,500 |
Well, there you have it! Now you know the answer to the pressing question: will Fidelity stop 401k contributions at the limit? I hope this article has shed some light on the subject and helped you plan for your retirement savings.
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