401k Contribution Limit Details

Understanding 401k contribution limit details can help you avoid any complications with your retirement account. Here are the basics of 401k contribution limits.

Employee Contributions

Each 401k plan will have its own rules about how much an employee can contribute of his or her own salary. However, the government has mandated that an employee under 50 cannot contribute more than $16,500 per year to his or her account. If you are 50 or over, you will be eligible to contribute $22,000 per year. 

Employer Contributions

On top of any contributions you make to your account, your employer can contribute to it. Every year, the IRS will conduct a test on the company's 401k to make sure that regular employees are taking advantage of it as much as upper-level executives. In order to make sure that everything remains balanced, employers will contribute to employee accounts. They can choose a particular percentage of your salary to go up to with their match. For example, they might decide to match up to 6 percent of your salary in contributions. Between the employee and employer contributions, the amount cannot be above 100 percent of your salary. The employer cannot contribute more than $49,000 to an individual 401k account. 

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