No. You can contribute up to $19,000 of your own money to your 401(k) in 2019. If you're aged 50 or over, you can kick in another $6,000. Any employer matching contribution you get does not count towards your limit.

Key Takeaways

  • You can contribute up to $19,000 to your 401(k) in 2019. If you're aged 50 or over, the limit is $25,000.
  • Any employer match that you receive does not count towards this limit.
  • The same limits apply for 403(b) and 457 plans, and the federal government's Thrift Savings Plan.

These are the limits for a number of employee retirement plans that resemble the 401(k), including the 403(b), most 457 plans, and the federal government's own Thrift Savings Plan.

Understanding the 401(k) Plan

The 401(k) plan and the variations mentioned above are all long-term savings plans designed to help people build their retirement savings. They are all "qualified" plans, in IRS speak. That means they have certain tax benefits for the employee or the employer or both.

The tax advantage for employees, in most cases, is that their contributions are deducted from gross income, not net income. That reduces take-home pay. But less take-home pay means lower taxes, softening the blow. And the money goes into an investment account week after week, building long-term net worth.

Some employees also benefit from their employers' match. Employers can match some percentage of their employees' contributions, but it's strictly voluntary. Among employers who offer a match, the average is about 3% of the employee's gross salary. This is effectively a 3% salary bonus, and any personal financial advisor will tell you that it's nuts not to take full advantage of it.

The total contribution to a 401(k) plan from both employer and employee cannot exceed $56,000 in 2019, or $62,000 for those aged 50 or older.

The IRS does place a limit on the total contribution to a 401(k) from both the employer and the employee. The limit in 2019 is $56,000, or $62,000 for those aged 50 or older.

Other Retirement Plans

The 2019 contribution limits are the same for several other qualified retirement plans that are not as well known as the 401(k). These include:

  • The 403(b) Plan: This retirement plan is designed primarily for employees of public educational institutions, non-profits, and hospitals. It is often structured as an annuity or pension plan that pays in regular installments after retirement. That differs from the 401(k), which is a lump sum account that the employee can draw from after retirement.
  • The 457 Plan: This is available primarily to public service employees such as police officers and firefighters. Unlike the 401(k), it does not have a 10% tax penalty for early withdrawals.
  • The Thrift Savings Plan: This is exclusively for employees of the federal government and military personnel.