Based on 401(k) Resource Guide at IRS.gov, the combined total contribution you can make to all of your 401(k) plans (including traditional 401(k), Roth 401(k), and individual 401(k) plans) in 2013 increased by $500 to $17,500. The catch-up contribution limit stays the same at $5,500. However, you may be limited by what your employer allows you to contribute. For example, if your salary is $40,000 per year and your employer only allows up to 20% of your salary to be used for your 401(k) contribution, then your maximum is $8,000. Otherwise, the maximum legal limits allowed by the IRS are shown below.
The contribution limit remained unchanged from 2010 to 2011. Here are the current contribution limits:
If you are 50 years or older at the end of the calendar year, your plan may allow you to make “catch-up” contributions in addition to your normal contributions (unfortunately, not all employers are required to do this, and only some plans allow catch-up contributions). Here are the current 401(k) catch-up contributions limits:
If you participate in more than one 401(k) plan — i.e., a Roth 401(k) and a Traditional 401(k), or plans from multiple employers — the above 401(k) limits apply to the total amount regardless of the number of plans you participate in. The limits apply to your total combined contributions; your combined contributions across all plans cannot exceed the above limits.
Some employers contribute additional amount to your 401(k). These contributions are called matching contributions. Fortunately, the matching contributions made by your employer are NOT counted toward your 401k contribution limits. In other words, if you contribute the maximum amount each year, you are still eligible to receive your employer’s matching contributions above and beyond these limits.
For self-employed business owners who participate in an Individual 401(k) plan (also known as Solo 401(k)), there is an additional piece of information that you must be aware of: With an Individual 401(k) plan, you can contribute the Employee portion out of your salary, and in addition, your company can contribute up to 25% of your W2 wages up to the Maximum Employer Contribution below.
|Year||Maximum Employee Contribution||Maximum Employer Contribution||Maximum Combined Contributions|
For example, if you want to maximize your 401(k) contribution in 2013. You can pay yourself a salary of $134,000. You can then contribute $17,500 as an employee, and your company can match $33,500 as an employer for a maximum 401(k) contribution of $51,000.
In addition to the basic information above, there are rules governing highly compensated employees (HCE) and specific rules impose by your 401(k) plan administrator. To understand the specifics that apply to you, be sure to review your employer’s plan documents and contact the plan administrator for more information.
Realize, too, that participation in your employer’s retirement plan limits how much you can contribute to your Traditional IRA. For more information, please take a look at Contribution Limits for Traditional and Roth IRAs.
Reference: 401(k) Resource Guide – Plan Participants – Limitation on Elective Deferrals at IRS.gov.