Does my employer's matching contribution count towards the maximum I can contribute to my 401(k) plan?

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October 2016
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Simple answer is no.

A 401(k) is an employer sponsored qualified retirement program. When considering contributions, there are two sides of the program- what you contribute (employee) and employer(company) contributions. According to IRS guidelines, in 2016 an employee is allowed to contribute a maximum (work earning) of $18,000 a year. If you are over 50 years of age you may contribute an additional (from work earning) $6,000 for a total of $24,000 this year, as long as you have at least that amount in income. Of course you can contribute anywhere from 0 to $18,000 or if over 50 the catch up amount. Many people believe the contribution limit is a percentage, but it is really a fixed amount. Any contribution from an employer match is not included in your income contribution limit.  An employer can match in many ways from a straight percentage, 0,1,2,or 3%, which is the most common or more, of salary to a percentage of fifty cents of the employee contributions up to 6% of your gross salary. Contributions to a 401(k) are pretax meaning contributions come out before Federal, State, or City taxes. The employer match is a nice benefit and if you can afford contributions, contribute at least the amount to get the match.

Before contributing to a retirement plan make sure you can afford contributions, because if you need to withdraw funds there are some stiff penalties and tax consequences if you withdraw before you are 59 1/2. Review your contributions at least annually to ensure the plan/ contributions meets your long term risk tolerance and goals.

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