Financial Learning Center
- Your Money Stays in the Plan
- Rollover from a Previous Employer
- Investing Your 401(k) Funds
- Selecting a Beneficiary
- Comparing your 401(k) to Other Retirement Plans
- Should You Participate in a 401(k) Plan?
- Does Your Spouse Have a 401(k) Plan?
- Deciding How Much to Contribute to the Plan
- What Can You Afford to Contribute?
- Limits on Contributions
The IRS limits contributions to 401(k) plans in three different ways:
1. Dollar Limits on Pre-Tax Contributions
The IRS places an annual dollar limit on pre-tax contributions to 401(k) plans, which is indexed for inflation. In 2019 the limit is at $19,000 ($18,500 in 2018). A catch-up contribution of $6,000 can also be made in 2019 (same as 2018) if you are at least age 50.
IMPORTANT NOTE: Check with your benefits department regarding the specifics of your plan limits.
2. Overall Limits on Contributions by You and Your Employer
The total annual contribution (including the employer matching contribution) to your 401(k) plan account and other defined contribution plans in 2019 cannot exceed 100% of your 2019 compensation or $56,000 ($55,000 in 2018), whichever is less. Your employer decides the maximum contribution you can make depending on your company's 401(k) plan.
Note that catch-up contributions are not subject to this limit. In other words, if you are over age 50, your total annual contribution in 2019 can be as high as $62,000, or 100% of your compensation, whichever is less.
Remember, in the case of any IRS limit, you can contribute only the lowest amount for which you are eligible under any of the limits.
3. Limits on Highly Compensated Employees
Regulations under the Internal Revenue Code, not your employer, may also limit the percentage of pay that highly compensated employees, generally those earning in excess of $125,000 in 2019 ($120,000 in 2018), can contribute based on the average percentage contributed by all other employees in any one year.
Even if you are a highly compensated employee, you should consider contributing the maximum you are allowed under the 401(k) plan, and explore other avenues to save for retirement.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA (Opens in a new Window)/SIPC (Opens in a new Window). UniVest Financial Services is a trade name of UniBank. Infinex and UniBank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of, nor guaranteed or insured by, any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.