If your employer offers a 401(k) plan, it can be one of the easiest and most effective ways to save for your retirement. But while a major advantage of 401(k) plans is that they let you put a portion of your pay automatically into your account, there are some limits on how much you can contribute.
Each year, usually in October or November, the Internal Revenue Service (IRS) reviews and sometimes adjusts the maximum contribution limits for 401(k) plans, individual retirement accounts (IRAs), and other retirement savings vehicles. Here are the limits for 2019.
- Employees can contribute up to $19,000 to their 401(k) plan for 2019.
- Anyone age 50 or over is eligible for an additional catch-up contribution of $6,000.
- Employers can contribute, too, but there's a $56,000 limit on combined employer and employee contributions ($62,000 if eligible for a catch-up contribution).
Basic Limits for 2019
The basic employee contribution limit for 2019 is $19,000, up from $18,500 in 2018. The $19,000 limit includes all elective employee salary deferrals, as well as any after-tax contributions made to a designated Roth account within your 401(k). The same contribution limits apply to 403(b) plans and most 457 plans, as well as to the federal government’s Thrift Savings Plan.
If you have multiple 401(k) accounts, your total contributions to all of them—both traditional and Roth—cannot exceed that $19,000 limit. Any contributions you make to other types of retirement accounts, such as IRAs, do not affect your 401(k) contribution limit.
To encourage workers nearing retirement to speed up their saving, the IRS allows 401(k) participants ages 50 and over to make additional contributions beyond the standard contribution limit. If you are 50 or older, you can kick in an extra $6,000 catch-up contribution, for a total of $25,000. The $6,000 catch-up figure is unchanged from 2018.
Another big benefit of participating in a 401(k) plan is that your employer may contribute to it, as well. Many employers match employee contributions by adding, for example, 50 cents or $1 for every dollar the employee contributes. Employers can also make elective contributions regardless of how much or little the employee contributes, up to certain limits. The general limit on total employer and employee contributions for 2019 is $56,000, or 100% of employee compensation, whichever is lower. For workers 50 and up, the limit is $62,000 ($56,000 plus the $6,000 catch-up contribution).
Depending on your age and compensation level, you may be subject to different limits than your coworkers.
Limits for Highly Paid Employees
If you earn a very high salary, you may be considered a highly compensated employee (HCE), subject to more stringent contribution limits. To prevent wealthier employees from benefiting unfairly from the tax benefits of 401(k) plans, the IRS uses the actual deferral percentage (ADP) test to ensure that employees of all compensation levels participate proportionately in their companies' plans. If non-highly compensated employees (NHCEs) do not participate in the company plan, the amount that HCEs can contribute may be restricted.
The Limits at a Glance
This chart from the Society for Human Resource Management summarizes the rules for defined-contribution plans (401(k), 403(b), and most 457 plans) in 2019.