2020 vs 2019 Maximum 401k Contribution Limits

A lot of people assume the maximum annual contribution to employer sponsored retirement plans like a 401(k), 403(b) or Government Thrift Savings Plan (TSP), are what is published at the individual level. However, this could be very misleading if your employer contribution or match is generous and/or you are a high income earner.

The table below shows for the current year the individual/employee level 401(k) contribution limits. But this is only 33% of the total maximum allowed if you consider what your employer can contribute.

Year
Contribution Limit
Maximum Employer Contribution
Max. for ALL Contributions (excl. Catch-up)
Additional Catch-up Amount (age > 50)
2020
$19,500
$37,500
$57,000
$6,500
2019
$19,000
$37,000
$56,000
$6,000
2018
$18,500
$36,500
$55,000
$6,000
2017
$18,000
$36,000
$54,000
$6,000
2016
$18,000
$35,000
$53,000
$6,000
2015
$18,000
$35,000
$53,000
$6,000

Let me give you an example to illustrate my point. Suppose Mike works for an employer who matches 100% of contributions – and there are quite a lot of employers who offer generous matching to attract talent. Mike earns $200,000 a year as Senior Director or IT. He contributes to his employer sponsored 401k plan up to the individual maximum of $18,000 per year.  However because his employer matches his contribution his total non-taxable contribution for that year is a whopping $36,000. Well above his individual contribution and add make a substantial to his retirement savings.

The point being is that don’t just look at the individual contribution limits (which change every year). Consider the grand total and where possible make sure you employer provides as generous a contribution as possible. Or if picking a new employer, look closely at their matching 401K contribution to try and get the maximum match.

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