Maximum Employer 401K Contributions
I’d like to clear up a very common 401K misconception surrounding maximum contribution limits.
Question: The individual IRS maximum 401K contribution limit is $19,500 for 2021 ($26,000 if you include the catch-up contribution for those age 50+). But what exactly does this mean? Does this mean that if my employer matches my contribution dollar-for-dollar that I can only contribute half of the maximum?
Answer: No. The IRS maximum 401K contribution is how much you can personally contribute to your 401K during a calendar year. Your employer’s maximum 401K contribution limit is entirely up to them – but the max on total contributions (employee plus employer) to your 401K is $58,000 in 2021 (or 100% of your salary, whichever is less). If age 50+, it goes up to $64,500 in 2021 with the catch-up contribution.
Technically, this means that your employer could contribute up to $38,500 in 2021, separate from your maximum personal contribution. Most do not contribute that much, however, and through after-tax contributions and an after-tax to Roth conversion, or “mega backdoor Roth“, it’s possible for you to contribute more than the individual contribution maximum in a given year (if your employer allows it).
Employer 401K Maximum Limit Discussion:
- What is your employer’s match?
- Did you think that your maximum contribution was your personal plus your employer’s?
- Are you going to max your 401K contributions this year?
- What if you Over-Contribute to a 401K?
- Your Employer’s 401K Match is Not a Suggestion or Maximum
- 2020 & 2021 Maximum IRA Contributions
- 401K Matching