2014 vs. 2013 401k, 403b Contribution Limits and Catch-up Amounts

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401k and 403b contribution limits[Updated with 2014 contribution limits] The IRS has released 2014 employer sponsored retirement plan -  401(k), 403(b), and Government Thrift Savings Plan (TSP) - limits. For 2014 there are no increases in the employee contribution limits meaning that the maximum amount employees will be able to contribute remains at $17,500, on a pre-tax basis next year. The catch-up pre-tax contribution limit available to employees over 50 also remained unchanged at $5,500.

The maximum limit for defined contribution plan deferrals from all sources (employer and employee combined) increased to $52,000 per participant from $51,000 in 2013.

401k Employee and Employer Contribution Limit

Your 401k maximum contribution limit is the combined total maximum contribution that you can make each year to ALL 401k plans in which you participate, including standard 401k plans and Roth 401k plans— and is the lower of: (1) the maximum percentage contribution limit allowed under each of your employers’ plans, or (2) the dollar limits shown in the table above. For example, if your employer’s 401k plan allows you to contribute up to a maximum of 10% of your salary, and you earn $50,000, your maximum contribution limit is $5,000, not the $17,500 contribution limit that applies only to higher-paid employees.

Additional total limits. In addition to the limit on elective deferrals shown in the table above, annual contributions to all of your accounts may not exceed the lesser of 100% of your compensation. Further, the compensation limitation that can be taken into account when determining employer and employee contributions is $260,000 for 2014 and $255,000 for 2013.

Maximum Employer Contributions. Matching 401K or 403b contributions made by your employer are NOT counted toward your annual 401k contribution limits (elective deferrals). Even if you contribute the maximum amount each year, your employer’s matching contributions are in addition to these 401k limits.  Your employer’s 401K maximum contribution limit in 2014 is $34,500 ($52,000 –  $17,500) or 100% of your salary, whichever is the smaller amount. Though most employers rarely give anywhere near the maximum, with most generally matching 3% to 6% of employee contributions.

Note: When filing your 2013 tax return in 2014, you need to refer to the 2013 limits. The 2014 limits are applied to 2014 tax returns filed in 2015.

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[Updated for 2013 contribution limits] The IRS has released 2013 employee sponsored retirement plan –  401k, 403b, and Government Thrift Savings Plans - limits and employees will be able to contribute an additional $500 per year, up to $17,500,  on a pre-tax basis next year. This was the second consecutive year of increases to contribution limits.  The catch-up contribution limit available to employees over 50, remained unchanged at $5,500.

The maximum limit for defined contribution plan deferrals from all sources (employer and employee combined) increased to $51,000 per participant from $50,000 in 2012.

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[Updated for 2012 contribution limits] The IRS has now released the official 2012 401k, 403b and other retirement plan contribution limits, which reflect a $500 increase over the 2011 standard contribution limit. This is a result of higher inflation and the latest cost of living adjustment (COLA) figures. The 2012 contribution limit is the first increase in three years. Each year in October these limits are adjusted according to a formula based on the inflation rate (linked to COLA) in the third quarter vs. the previous year’s quarter.


What this means for your 401k, 403b and other retirement plans:
The maximum amount an employee can contribute to a 401k in 2012 will increase to $17,000 and for individuals over the age of 50, their catch-up contribution will remain unchanged at $5,500 (see table).
The Federal government’s Thrift Savings Plan and other retirement-savings plans – like 403(b) and 457(b) plans – are subject to the same limits.

According to a recent survey of more than 550,000 401k accounts, very few Americans are actually saving the maximum allowable per year. Only 7% of workers with a 401(k) plan came within $500 of contributing the maximum allowed by the IRS or their plan limit and that on average, retirement plan participants contribute 6.8% percent of their salaries on a pre-tax basis.

2012 Maximum Employee and Employer 401K Contribution Limits and Catch-up Amounts

Maximum Employee and Employer 401K Contribution Limits and Catch-up Amounts

Contribution deadlines: Remember, unlike IRA plans where you have until April 15th (tax filing deadline) of the subsequent year to make contributions, you must make all your 401K or 403b contributions within the calender year. Some employers do offer extensions, but rarely is this the case.

Subscribe (free) via RSS or Email to get updates on future retirement plan limits, plus many other useful personal finance and 401K/Retirement related articles.

Official Reference: IRS

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[Previous Update - Oct 2009] Many workers have failed to take advantage of higher limits in 401K plans over the last few years. Not surprising given the stock market crash of the year past, which meant that the last thing people probably wanted to look at and deal with was their 401K retirement accounts. However, investing via your employer sponsored 401K or Individual retirement plan (IRA) is still your best form of automatic long term investing thanks to the tax deductions, employer matches and the benefits of compounding. Even fractionally increasing your 401K contributions can lead to significantly higher retirement savings down the road.

More on the 401K limits and contribution rules

The 401k contribution limit jumped up to $16,500 as of January 1st, 2009 (which is unchanged in 2010). That’s a $1000 (6.5%) jump from the $15,500 limit in 2008.

Catch up Contribution Limits for those 50+ has also increased
If you are age 50 or older and your employer allows it, you are also be eligible to make “catch-up 401k contributions” in addition to your regular 401k limits. These catch up contribution limits have also increased to a total of $5,500 which brings the 2009/2010 maximum 401K contribution limit to $22,000 for those over 50. For all those people who feel that they do not have enough of a retirement nest egg, this higher contribution gives them a great tax free opportunity to catch up.

Next Steps

With the stock market in recovery, investing now could be the best decision for many if 2009 was indeed the bottom of the market – see Morningstar.com for a list of the best performing funds. To increase your contribution you normally need to contact your payroll/benefits department or your 401K administrator (like Vanguard, Fidelity etc), and make sure you have the right asset allocation for your age. If you cannot afford to contribute up to the maximum, then try to at least contribute up to your available employer match.

What 2011 401K limits could look like

After no change in 2010 401K , thanks to near zero real inflation, it is likely that in 2011 we will only see marginal increase again. However some new retirement legislation like 401K/IRA to Roth IRA rollovers are still available in 2011 and could be beneficial for many looking to implement smart tax strategies in a rising tax environment and possible expiration of bush tax cuts.

Based on the most recent CPI data, inflation is running at about 2%. Given a sluggish economic environment and various forecasts it is likely that inflation will stay around this level. So extrapolating from this we can expect between a 0% (current levels) and 2% rise in the retirement account limits

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{ 36 comments… read them below or add one }

Robert March 10, 2013 at 9:38 am

Hi,
I am contributing the max of 15% of my paycheck, I will reach the max allowable by goverment in July, what happens then? The plan stops witholding? That would be good except I will lose the 5% match by company for the rest of the year!!!!!

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Andy (Author) November 8, 2013 at 9:47 am

It depends on your company. At a lot of companies the plan administration leaves it to the employee to check contributions. If you over contribute you will have to pay it back at tax time and may face a penalty for over contribution.

Yes the match is only for the maximum allowed amount. So you lose it once you hit the max.

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Lynn January 24, 2013 at 8:23 am

If I just got a new part time job making 28,000 is there any reason why I can’t save the maximum $17,500 in my employers 403b? Thank you!

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Andy January 24, 2013 at 10:44 am

For 2012 and 2013, the IRS has published guidelines that specify a total of employer and employee contributions in a 403b plan cannot exceed the lesser of $50,000 for 2012 and $51,000 for 2013 or 100% of includible compensation, plus any age 50 catch-up contributions.

But the 100% of employee’s includible compensation is based on comp for your most recent year of service. So this year you should be able to contribute the full $17,500 – assuming you stay employed.

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Dave S. December 12, 2012 at 8:20 pm

I am 59, I have not made any catch up contributions to my 401K. Am I limited to the $5500 each year now or can I contribute more since I did not in previous years?

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Andy (Author) December 12, 2012 at 9:15 pm

You can make catch-up contributions of $1,000 since you are over 50 (to an annual total maximum of $6,500). Unfortunately, though you cannot make retroactive contributions for years you missed out on, since April 15 of the following tax year is the cut-off date.

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maureen March 20, 2012 at 10:58 pm

With a defined contribution plan (Safe Harbor and profit sharing) and a matching 401k plan, all contributions in total will exceed the $49,000 limit. In the total amount calculated to reach the $49,000 limit, does the catch-up $5,500 that I put in above the 16,500 count in the $49,000 upper limit? As such, the last payment of the year, the profit sharing piece from the company, has to be limited to the remaining gap to reach the $49,000. But i and the company are questioning if my catch up $5,500 is including in that $49,000, therefore the profit sharing has to be lower then the determined amount for employees. (difference is paid out in another form.)

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Wendy February 22, 2012 at 5:10 am

We have a 403b where I work and when we retire we are paid for 100 sick days if we have 100 days accrued. One of the accountants wants to have our contract changed to state that we can either accept this as a cash payment (which is what they do now) or we can opt to have this deposited into our 403b to save on the taxes. From what I am reading in your post, I am thinking that this money could only be deposited up to the maximum employee contribution for the year as this is our own accrued money and not the school districts contribution (also, they do not contribute to our 403b only the employees do).

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Janet Riessman February 10, 2012 at 12:48 pm

Question: I just started at a job and plan to contribute the max to my 403(b) account. I am currently 49 years old, but turn 50 in August. Am I allowed to take advantage of the Age 50 Catch Up Contribution beginning now (Feb), as when I file my 2011 taxes I will be 50, or literally can I not contribute until I turn 50 in August? If the latter is the case, I assume I can contribute that extra $5500 in the months between my 50th birthday and the end of the calendar year ($1375 extra per month Sept-Dec)…?

Many thanks!

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andys2i February 11, 2012 at 11:00 am

Janet – According to the IRS, you can only make catch-up contributions when you are at age 50 or over at the end of the calendar year. So as you were 49, at the end of 2011 you won’t be able to make catch-up contributions for that tax year (even though you have till April 2012 to make contributions). But this year (2012) you will be eligible to make the full – $5,500 – catch-up contribution amount.

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anthony January 30, 2012 at 3:16 pm

can both my wife and i contribute to 401k’s for the maximum amount (at diferent companies) of f approx $17,000? I’m over 50… so i can invest the extra catch up amount….

or can I contribute to my hospital’s 401k + catch up and can she invest in a ira or roth ira at the same time? are there any maximum amounts for couples?

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andys2i January 31, 2012 at 9:11 am

You can both contribute to your 401K plans as the limits are individual (unlike taxes, where couples have joint income thresholds). This also includes the catch-up contributions. Maximum limits for all retirement account contributions can be found here : http://www.savingtoinvest.com/2011/11/2012-maximum-employee-and-employer-401k-contribution-limits-and-catch-up-amounts.html

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RJ December 23, 2011 at 6:31 pm

Assume you are covered by a defined-benefit plan and you contribute a certain amount for this plan. If, in addition, you have a 401(K) and 457(B) plan in effect, what is the total amount you are allowed to contribute to all of these three plans. Is there an overall annual limit applicable to these three plans together?

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andys2i January 5, 2012 at 12:22 am
Jay Wilcox November 29, 2011 at 6:29 pm

What is the maximum contribution a Missouri city may make to its employees’ 401K plans?

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andys2i November 29, 2011 at 10:49 pm

Great question and I updated the post with the information. Your employer’s 401K maximum contribution limit is is $49,000 or 100% of your salary, whichever is the smaller amount. Though most employers rarely give anywhere near the maximum, with most employers matching 3% to 6% of employee contributions. Technically, this means that your employer could contribute up to $32,500, if they wanted to, and it would not count against your $16,500 personal contribution maximum .

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MikeJanz November 11, 2011 at 10:10 am

What are the differences b/w a 401k and a 403(b) plan?

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Andy November 11, 2011 at 10:10 am

Answer: Very little. Both are offered by your employer, both may or may not feature employer matching contributions, both take contributions pre-tax up to a specified yearly limit, both are called “defined contribution” plans (versus “defined benefit” like pensions), and both are great ways to save for retirement. The differences between the two types of plans have been greatly minimized with the passing of the Economic Growth and Tax Relief Reconciliation Act of 2001. Remember, the names of these plans are derived from the section of the United States Internal Revenue Code under which they are defined. The three main ones are the 401(k), the 403(b), the 401(a) and the 457. So, it’s not necessarily the case that the plans are different, they’re just specified in different sections. That being the case, the main difference is that the 401(k) is offered by for-profit businesses whereas the 403(b) is offered by not-for-profit businesses. [The 401(a) and the 457 cover employees of state and local governments and some other tax-exempt organizations.] For all intents and purposes to the employee, there are very few other differences (you can get your money out earlier than 59.5 under certain circumstances) but there is proposed legislation to bring the two plans even closer together. If you’re deciding between two jobs (even if it’s your current job versus your potential new job), one that offers a 401(k) and another that offers a 403(b), rest assured that they’re basically the same so it should not affect your decision

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mike November 10, 2011 at 11:15 pm

What is the maximum amount that an employer is allowed to contribute to an employee’s retirement plan – for a non-profit corporation, if that makes a difference.

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Olly November 8, 2011 at 1:28 pm

Can you contribute the limit 16,500 to 401k and then contribute to your 403b at another job up to 16,500? which total 33,000 a year for retirement.

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andy November 8, 2011 at 1:33 pm

No. The maximum contribution limit is $16,500 per year to a 401K or 403b account. However you can contribute to an IRA or Roth IRA account. Here are more details: http://www.savingtoinvest.com/2011/09/2012-401k-ira-and-roth-ira-contribution-and-income-deduction-limits.html

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c nguyen April 5, 2011 at 5:56 pm

Hi , I am 40 yo now, and I am making more than 250K. I currently work for a small company which provide 401K. I do contribute maximum amount of $16,500. I also own a side bussiness and I did contribute a maximum amount of $11,500 this year into Sep IRA. I know that is only $27,000 total can be save for this year retirement. I used to have an accountant and I did have profit sharing plan which i can contribute about $40,000 a year. Can you help me, Is there any thing else I can set up to maximize my contribution for retirement. thank you

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dev lucas January 30, 2011 at 3:15 pm

hi,

I was in a training program making 50k per year. I worked from Jan 2010 to June 2010 and then started a job which pays very highly, because my training is now complete so salary is no longer a stipend but a huge check everymonth compared to what I made earlier.

My training program did not offer any retirement savings. So far I do not have any retirement savings. Since 2010 is already gone can I still open retirement account for tax benefit in 2010 or not?

When I asked HR division in my company they told me that I can open one for 2011 but not for 2010. Someone who is good in this area told me that I can open independent personal IRA with any of the companies like charlesschwab, fidelity etc for 2010?

I would like to what you all suggest?

thanks

DL

Reply

andys2i January 30, 2011 at 4:51 pm

You can open a personal IRA for 2010 – See this article for more options and rules : How and Where to Open a Traditional IRA or Roth IRA Account and Factors to Keep in Mind

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dev lucas January 30, 2011 at 7:23 pm

Thanks much andys2i, I really appreciate your help. I read the article you mentioned. Based on that I understand that I can contribute $5000 and my non earning wife also can contribute (hopefully…!) $5000 in IRA for 2010 before April 2011.

I am planning to do this as pre tax dollars so I can save some money in taxes. My question is between me and my wife do I have option to invest more in pretax money as employee did not provide 401k plan, or do I have to content with max 10000 for us as a couple.

thanks again for your quick reply.

DL

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Jim January 30, 2011 at 10:29 am

I work for a small company where highly compensated employees apparently cannot contribute the maximum to the 401k plan because of lack of participation by other employees. I am over 59 and would normally make catch-up contributions but apparently cannot because of the current 401k rules. Does anyone know of a publication (IRS or otherwise) which clearly explains the rules regarding highly compensated employees in small company 401k plans and the rules for contributing to these plans if you are over the age of 59. Any help would be greatly appreciated. I have searhed in vain on the IRS web site and have called them only to be placed on hold over 1/2 hour several times.

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Chris November 14, 2010 at 12:11 pm

DC,

Would need more information, but the IRS establishes maximum contributions but allows individual employer plans to establish their own rules on contribution limits and percentages. If your employer plan is allowing you contribute 15% and you are within the contribution maximums outlined by the IRS then you should be fine.

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Alicia November 9, 2010 at 3:46 pm

Hi, If I have already contributed to my ROTH IRA (maximum amount), can I also contribute to my employers 401(k) plan? (new to me this year).
Thanks

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andys2i November 9, 2010 at 4:56 pm

Yes. Your Roth IRA limit is 5,000 (assuming you qualify based on income limits). Your 401K contribution is $16,500 or up to 15% of your income (modified AGI). You can and should contribute to both.

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Joe Black December 11, 2010 at 11:07 am

andys2i wrote:

“…to ensure that your Roth IRA contributions are deductible at year end.”

Roth IRA contributions are deductible?

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John Walker November 8, 2010 at 9:10 am

Ehh, the table says 2012 is depends on info released in 2011…so no CJ, it shouldn’t be 2010

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DC September 8, 2010 at 5:31 pm

If my employer limits my 401K contribution to 12%, but I’ve only been contributing 7% and I am eligible for the catchup contributions, can I use the catchup contribution percentage to bring my total to 12% of annual salary plus $5500? Their website allowed me to increase my catchup percentage to 15%, but I am wondering if the IRS puts the contributions in separate buckets and I will get in trouble even though I don’t exceed the maximum combined total.

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Chris / 401k limits February 27, 2011 at 7:12 pm

As above…. Would need more information, but the IRS establishes maximum contributions but allows individual employer plans to establish their own rules on contribution limits and percentages. If your employer plan is allowing you contribute 15% and you are within the contribution maximums outlined by the IRS then you should be fine.

Basically, contribute as much as your plan will let you…. usually they will not let you exceed the IRS maximums.

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Qwoter April 29, 2010 at 9:14 am

>401k and IRA catch up contributions are usually the best tool utilized by people nearing their retired status, who didn’t save early for their retirement.

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CJ March 15, 2010 at 8:47 pm

>Your table says the 2011 limits are announced in October 2011. Shouldn't that be 2010?

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Chris March 23, 2011 at 4:28 pm

CJ,

Correct. The 401k limits for 2011 were announced in late October 2010.

Reply

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