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The IRS sets hard limits on how much you can contribute to 401(k) accounts annually.
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A 401(k) is a type of retirement account that both you and your employer can contribute to.
The IRS sets 401(k) contribution limits each year.
The limits on 401(k) contributions change annually and vary by type of account and age.
A 401(k) is a type of employer-sponsored retirement account you can use to save, invest, and build wealth for retirement.
With these accounts, both you and your employer can contribute funds. On your end, you’ll do this by electing a salary deferral — essentially a portion of your pre-tax wages that will go directly into your 401(k) account with each paycheck.
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But how much can you defer? That depends on the type of account you have and your age. Here’s what you need to know about 401(k) contribution limits.
401(k) contribution limits for 2022 and 2023
The Internal Revenue Service sets contribution limits for all types of retirement accounts, 401(k)s included. These change annually and are based on recent economic data.
“The 401(k) contribution limits are indexed for inflation, so they usually change every year,” says Cindi Turoski, a certified public accountant, CFP® professional , and managing partner of Bonadio Wealth Advisors. “2023 had one of the biggest increases — a silver lining to inflation.”
As Turoski notes, the 2023 401(k) contribution limits increased quite a bit — both for traditional 401(k)s and SIMPLE 401(k)s, which are generally reserved for small businesses. See below for a breakdown of the current limits for both types of 401(k) contributions in 2022 vs. 2023:
Contribution type
2022
2023
Traditional and Roth 401(k), age 49 and younger
$19,500
$22,500
SIMPLE 401(K), age 49 and younger
$14,000
$15,500
Traditional and Roth 401(K), age 50 and older
$26,000
$30,000
SIMPLE 401(K), age 50 and older
$17,000
$19,000
Taxpayers age 50 and older can make what the IRS calls “catch-up contributions.” These allow those closer to retirement to contribute more than other taxpayers. In 2023, the extra amount is $7,500 for traditional and Roth 401(k)s and $3,500 for SIMPLE 401(k)s.
Important: There are both individual 401(k) contribution limits as well as aggregate ones, which include both your and your employer’s contributions. The aggregate annual limit is 100% of your compensation or $66,000 for taxpayers over 50 ($73,500 if you’re older than that).
Traditional 401(k) vs. Roth 401(k) contribution limits
Traditional 401(k)s are funded with pre-tax dollars, meaning you’ll pay taxes on your withdrawals once you enter retirement. Roth 401(k)s, on the other hand, work the opposite way. You fund these accounts with after-tax earnings, making your eventual withdrawals tax-free.
Employers can offer one or both types of 401(k) accounts. And while they do function differently, the IRS-established contribution limits are the same — across any traditional or Roth 401(k)s you have open.
“These limits are aggregate totals, so if your employer offers both a traditional and a Roth 401(k), the maximum that you can put into both cannot be over these new limits,” says Faron Daugs, a CFP® professional and wealth advisor and the founder of Harrison Wallace Financial Group. “You can split the contribution or put it all into one type of 401(k), but you cannot go over the participation limit.”
Important: Roth 401(k)s are different from Roth IRAs. Though both have annual contribution limits, Roth 401(k)s limits are higher. Additionally, Roth IRAs have income limitations. If you make more than $218,000, you cannot contribute to a Roth IRA.
401(k) contributions for highly paid employees
If you’re what the IRS considers a “highly compensated employee,” there may be additional limitations on how much you can contribute to your 401(k) plan.
“Some 401(k) plans may limit contributions if you are considered a highly compensated employee, effectively limiting no more than 2% more of your salary than the average non-highly compensated employee contribution,” says Joe Buhrmann, a CFP® professional and senior financial planning consultant at eMoney Advisor.
“For example, if the average non-highly compensated employee is contributing 6% of their salary, a highly compensated employee could contribute a maximum of 8% of their salary,” Buhrmann says.
“While the limits that an HCE can contribute to the 401(k) is not different than stated above, they can be limited based on non-discrimination testing that must be applied to all 401(k) plans,” Daugs says. “If many of the employees that are not considered HCE are not contributing to the plan or contributing a very low percentage, it will reduce the overall percentage that the HCE can contribute. Therefore, they may not be able to contribute the IRS maximum. These non-discrimination tests are run annually generally in the first quarter following the last fiscal year.”
Per the IRS, a highly compensated employee is one who owns more than a 5% stake in the business at any time during the year or who makes more than $150,000 per year. Employees in the top 20% of compensation at a company may qualify as HCEs as well.
As Turoski explains, these rules ensure that a plan’s “annual contributions don’t overtly benefit HCEs more than non-highly compensated employees.”
What happens if I contribute too much to my 401(k)
If you accidentally contribute more to your 401(k) than the IRS allows, you’ll first need to notify your 401(k) plan administrator and ask them to distribute the excess contributions to you by the April 15 tax filing deadline.
“If the corrective distribution is made by tax filing time for the year of the excess contribution, it is included in income in the year it was contributed, and a corrected W-2 should be issued,” Turoski says. “The earnings it had would be distributed, too, and are taxable in the year received and reported to you on a Form 1099-R.”
If you fail to request the excess funds be paid out before tax day, you’ll need to withdraw them as distributions. These come with a 10% penalty if you’re under the age of 591/2.
“The good news is that for most participants who have remained with the same employer during the year, most plans have infrastructure and safeguards in place to ensure you don’t exceed IRS contribution limits,” Buhrmann says.
401(k) contribution limits frequently asked questions
What are the contribution limits for a 401(k) in 2023
In 2023, taxpayers can contribute up to $22,500 to traditional and Roth 401(k)s and $15,500 to SIMPLE 401(k)s. Taxpayers 50 and older can contribute an additional $7,500 to traditional and Roth accounts and $3,500 to SIMPLE ones.
How often does the IRS change 401(k) contribution limits?
The IRS reassesses its 401(k) contribution limits annually. They may rise or fall based on inflation. In 2023, they increased by $2,000 for traditional and Roth 401(k) plans and $1,500 for SIMPLE 401(k)s.
How much can I contribute to my 401(k) in 2023 if I’m over 50?
If you’re over the age of 50, you’re allowed to make what the IRS calls “catch-up contributions,” which help you save more as you close in on retirement. For 2023, you can contribute an additional $7,500 to traditional and Roth accounts and $3,500 to SIMPLE ones.
Can I contribute 100% of my salary to my 401(k)?
That depends on how much money you make. As an individual, you can only contribute up to $22,500 to traditional and Roth 401(k)s and $15,500 to SIMPLE 401(k)s. Taxpayers 50 and older can contribute up to $30,000 to traditional and Roth accounts and $19,000 to SIMPLE ones. Your total annual contributions — including those made by your employer — cannot exceed 100% of your compensation or $66,000 if you’re under 50 ($73,500 if you’re over 50).
Does the 401(k) contribution limit include the employer match?
There’s an individual 401(k) contribution limit and an aggregate one, which includes both your and your employer’s contributions. The aggregate annual limit is 100% of your compensation or $66,000 for taxpayers over 50 ($73,500 if you’re older than that).