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While contributing to a 401(k) plan to prepare for retirement — and earn your employer's match if you have one — there's a limit to how much you can add every year. The IRS sets a limit on how much you and your employer can add to your 401(k) plan ever year, and exceeding that could result in extra tax penalties if not addressed.
401(k) contribution limits 2023
In 2023, the 401(k) contribution limit is $22,500 for employees, or $30,000 for employees age 50 or older.
401(k) contribution limits 2024
For 2024, those limits rise to $23,000, and $30,500 for those 50 and older due to catch-up contributions.
| 2023 401(k) contribution limits | 2024 401(k) contribution limits |
|---|
Employee contribution limit | | |
Catch-up contribution limit for individuals age 50 and older | | |
Maximum employee and employer contribution | Cannot exceed the lesser of $66,000 or 100% of employee compensation, whichever is less. | Cannot exceed the lesser of $69,000 or 100% of employee compensation, whichever is less. |
» Crunch the numbers: Use our free 401(k) calculator to see if you're saving enough.
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Does my employer match count toward 401(k) limits?
If your employer offers a match for 401(k) contributions, the good news is that those contributions don't count toward your individual limit. However, the total of your contributions and theirs can't exceed the combined limit as set out by the IRS. The 2023 combined limit for employee and employer contributions is $66,000. For 2024, this limit is $69,000.
Can I max out both my 401(k) and Roth 401(k)?
If you have both a 401(k) plan and Roth 401(k) plan, you can contribute to both every year as long as the total contributions don't exceed the IRS limit for the year. If you’re choosing between the two, learn about the differences between a Roth and traditional 401(k).
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Are there income limits for 401(k)s?
While there's no universal income limit on 401(k) contributions, in some cases the IRS does impose contribution limits on "highly compensated employees" when a company encounters disproportionate contribution levels among its workers. The IRS has a test that helps employers who sponsor 401(k) plans to assess whether employees are participating in their plan at levels proportionate to their compensation.
If the test determines that people across compensation levels aren't participating in a manner the IRS deems proportionate, employee contribution levels for highly compensated employees can be lowered. In these cases, your employer may need to return some of your excess contributions.
The IRS defines a highly compensated employee in one of two ways:
An individual who either owned more than 5% of the interest in a business at any time during the year or the preceding year, no matter how much they were paid.
An individual who received over $150,000 from the business in the preceding year in 2023, or $155,000 in 2024, and, if the employer ranks employees by compensation, was in the top 20%.
Can I have a 401(k) and an IRA?
Yes. You can have both a 401(k) and an IRA. IRAs make a great supplement to retirement savings, especially if you’re contributing enough to receive a full match from your employer, or you’re planning on maxing out your 401(k). The annual contribution limit for an IRA in 2023 is $6,500; $7,500 for those 50 and up. In 2024, the IRA contribution limit rises to $7,000, or $8,000 if you’re 50 or older. And you can make contributions to an IRA for 2023 until April 15, 2024.
» Find the best IRA account for you
What happens if I exceed my 401(k) limit by mistake?
If you contribute too much to your 401(k) and notice your mistake before the tax filing deadline, you can probably correct it with your employer. You’ll need to notify your plan administrator. They’ll return the excess money to you, and you’ll get a new W-2 and pay taxes on your new total taxable wages.
If you don’t catch the mistake before the tax-filing deadline, you may have to pay taxes twice on the amount you contributed over the limit. That’s because the excess contribution can’t be deducted from your taxes in the year it was made, and because the IRS will still count that money as taxable when it’s distributed, too.
» Read more about what to do when you contribute too much to a 401(k)
FAQs
The 2024 contribution limit for 401(k) plans is $23,000, up from $22,500 in 2023. Those 50 and older can contribute an additional $7,500. Use our calculator to estimate your future balance. Arielle O'Shea leads the investing and taxes team at NerdWallet.
What is the 401k contribution limit for 2023 2024? ›
Employees can contribute up to $23,000 to their 401(k) plan for 2024 vs. $22,500 for 2023. Anyone age 50 or over is eligible for an additional catch-up contribution of $7,500 for both 2024 and 2023.
What is the 401k contribution limit for 2025? ›
Starting in 2025, catch-up contribution limits for retirement plans such as 401(k)s will increase from $7,500 per year to $10,000, and the limit will be indexed for inflation. For SIMPLE IRAs, the catch-up contribution limit is $3,500 in 2024.
What is a highly compensated employee 401k in 2024? ›
If you receive compensation in 2024 that's more than $155,000 and you're in the top 20% of employees as ranked by compensation, your employer can classify you as a highly compensated employee. 32 Compensation includes overtime, bonuses, commissions, and salary deferrals made toward cafeteria plans and 401(k)s.
Should I max out my 401k early in the year 2023? ›
It's never too early to set up a 401(k)—but there's no real benefit in maximizing your contribution as quickly as possible when offered an employer match. By maximizing your 401(k) annual contribution at the beginning of the year, you could miss out on your employer's maximum matching contribution.
What is the maximum IRA contribution for 2024? ›
The IRA contribution limits for 2024 are $7,000 for those under age 50, and $8,000 for those age 50 or older.
What is the maximum 401k contribution including employer matching? ›
Employer matching contributions do not count toward the $23,000 401(k) contribution limit in 2024. However, you and your employer may not contribute more than $69,000 combined, plus a $7,500 catch-up contribution for employees age 50 and older.
What are the new 401k laws in 2024? ›
Starting in 2024, people can withdraw up to $1,000 a year from their 401(k) plans or IRAs for emergency expenses without incurring the 10% early distribution penalty. Emergencies are defined as unforeseeable or immediate financial needs relating to personal or family emergency expenses.
What is the catch up contribution for 2024? ›
Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions. Annual catch-up contributions up to $7,500 in 2023 and 2024 ($6,500 in 2021-2020; $6,000 in 2015 - 2019) may be permitted by these plans: 401(k) (other than a SIMPLE 401(k)) 403(b)
What is the 401k limit for high income earners? ›
Employees who participate in 401(k) plans can put up to $23,000 in pretax or post-tax Roth contributions in 2024. But there's another limit, $69,000, including employee and employer contributions, that may let workers set aside even more.
A general rule of thumb says it's safe to stop saving and start spending once you are debt-free, and your retirement income from Social Security, pension, retirement accounts, etc. can cover your expenses and inflation. Of course, this approach only works if you don't go overboard with your spending.
Is it better to max out 401k or Roth IRA? ›
Fortunately, there's a rule of thumb for optimizing two kinds of accounts—a 401(k) and a Roth IRA or Roth 401(k)—that makes sense for most people. Start by contributing enough to your 401(k) to get the full employer match, then direct any additional savings to a Roth IRA up to the annual contribution limit.
Do you lose company match if you max out your 401k? ›
If you max out your 401(k) early in the year, you could miss part of your employer match, experts say. But some 401(k) plans offer a “true-up,” or additional deposit of the remaining employer match if you max out contributions before year-end.
What is the catch-up contribution for 2024? ›
Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions. Annual catch-up contributions up to $7,500 in 2023 and 2024 ($6,500 in 2021-2020; $6,000 in 2015 - 2019) may be permitted by these plans: 401(k) (other than a SIMPLE 401(k)) 403(b)
What is the simple 401k contribution limit for 2023? ›
Contribution limits
Employee - $16,000 in 2024, $15,500 in 2023, $14,000 in 2022 and $13,500 in 2020 and 2021.
What is the maximum contribution to the IRS in 2023? ›
The basic limit on elective deferrals is $23,000 in 2024, $22,500 in 2023, $20,500 in 2022, $19,500 in 2020 and 2021, and $19,000 in 2019, or 100% of the employee's compensation, whichever is less.
What is the max IRA contribution for 2023? ›
Note: For other retirement plans contribution limits, see Retirement Topics – Contribution Limits. For 2023, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than: $6,500 ($7,500 if you're age 50 or older), or. If less, your taxable compensation for the year.
