401k Contribution Limits 2023: A Comprehensive Listing & All You Need(Updated)

401k Contribution Limits 2021
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For self-employed individuals who want to save for retirement, there are retirement plans such as 401(k), Roth 401(k), and solo 401(k) contribution limits that could be your best bet. This article also gives you an overview of the 2023 401k contribution limits as well as the contribution limits matching by employers

401k Contribution Limits 2022 Overview

A traditional 401k is an employer-based retirement savings account that can be funded through staff salary deductions. These contributions decrease your taxable income and also reduces your tax bill. For instance, if your monthly income is $10,000 and you contribute $4,000 to your 401(k), you have only $6,000 of your paycheck that will be subject to tax. While the money is in your account, it is protected from taxes as it grows.

The 401k contribution limit for individuals has been increased to about $19,500 last year. Review your contribution rate to ensure that you are maxing your contributions to the extent that you are able to.

Types of 401(k) Contribution Limits

Below are three types of limits under 401k contributions.

#1. The Catch-up 401(k) Contribution Limit

The catch-up contribution limit incorporates the additional money that people above 50years of age can contribute to their 401(K) retirement plan. This contribution limit helps workers who are close to their retirement to hasten their savings plan. However, the elective deferral limits is about $7,000

#2. The Elective Deferral 401(k) Contribution Limit

The elective deferral limit describes the maximum amount of money that individuals can annually contribute to the retirement plan from their salary. The limit was about $16,000 in 2017 and in 2018 it was increased to $18,000.

#3 Additional 401k Contribution Limit

Additional contribution limit comprises all the elective deferral contributions, catch-up contributions, and all the money added by the employer in the matching funds or bonus system. The contribution limit cannot surpass the lesser of a person’s total yearly payment.

Roth 401k Contribution Limits

Oftentimes, some employers match employees’ 401k contributions up to a certain percentage of salary. It is important to note that any employer contributions to a Roth 401k. Thus it will be made pretax and will grow tax-deferred alongside your own Roth contributions. Meanwhile, if you withdraw from your Roth 401k contribution limit plan, you will owe income tax on the employer’s match. Therefore, If your tax rates will be higher in the future, then a Roth is the best bet account to decrease your future tax weight in retirement.

401(k) Contribution Limits 2021 and401k contribution limits matching by employers
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In addition, a certified financial planner in Dallas Melissa Brennan, recommends that people save at least 15% of their income for retirement, including any employer match. This means that If your employer contributes 2%, then you would need to top in an additional 13%.

Read Also: What happens to 401k when you quit: Best 2022 Practices (Updated)

401k contribution limits matching by employers

If an employer matches of your 401(k) contributions, that means that your employer contributes a certain amount to your retirement savings plan based on the amount of your earn annual

Also, depending on the terms of your employer’s 401k plan, the contributions to your retirement savings may be matched by employers contributions in different ways. However, employers match a percentage of employee contributions, up to a certain share of the entire salary.

For example, your employer offers a 50% match on all your contributions each year, up to a maximum of 5% of your annual income. If you earn $30,000, the maximum amount of your yearly contribution by your employer would be $900. Meanwhile, To increase your benefits you must also contribute $900.

Roth 401k Retirement Savings Tips

Here are pieces of tips for maximizing your Roth 401(k) account;

  • Max out your contributions. For each year that you’re able, aim to hit the $19,500 limit.
  • If your employer matches your contributions up to a certain amount, try to invest in your Roth 401(k) monthly.
  • Ensure that when you turn 50years add an additional $6,500 to that limit annually while you continue to work.

Solo 401k Contribution Limits

A solo 401(k) is a retirement plan designed specifically for business owners or Sole proprietors. A solo 401(k) limits give you all the benefits of one of the big employer-sponsored 401k plans, the tax break for savings and the tax-deferred maximum contribution. Moreover, a solo 401k limit can be even more beneficial if you can set up a preferred plan at the broker.

An important key difference between the solo 401(k) and other retirement plans is that employees can contribute all of their salaries up to the annual maximum contribution. They’re not confined to 25% of their salary, as done in some other retirement plans. This retirement plan also offers advantages over the SEP-IRA and SIMPLE IRA due to its Roth option.

In fact, the solo 401(k) plans are meant for one-person businesses, although there is an exception. It allows the spouse of the business owner to also participate in the plan.

Financial benefits of a solo 401k

#1. The solo 401(k) allows you to go above the usual limits of a 401(k).

#2. The solo 401(k) allows you to save more with the employer contribution, reducing your business taxes.

#3. The solo 401k doesn’t prevent you from taking advantage of other retirement plans such as the IRA. Unlike other retirement plans, for example- the typical 401k plan, the Solo 401k also allows you to take a loan against your account.

Solo 401k Drawbacks

Although these drawbacks aren’t burdensome, but you should always bind them in your mind.

The solo 401(k) will hit you with taxes and penalties if you withdraw the money before your retirement age.

It requires a paperwork to open a solo 401(k).

If you have above $250,000 assets in the plan at the end of the year, filling a special form with the IRS each year will be necessary.

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To wrap it up, the 401k limit for employee salary deferrals is $19,500, which is the same amount as the 401k 2020 limit. This is an advantage for those turning 50 years of age or older.

From the 2022 overview above, you will realize that when employers are matching your contributions limits, they add a certain amount to your 401k account. This is based on how much you contribute annually. However, the general way employers plans matching contributions is by matching a percentage of an employee’s contribution to a certain limit.


Pieces of information contained herein are solely for information purposes. We solicit you do not rely on few calculations found in this article. Consult your employer or a retirement saving plan adviser for proper directives.

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