401k Contribution Limits And Rules For 2011 (2026)

Saving money on 401k contribution limits rules does not have to be complicated. We rounded up the essentials so you can spend less and skip the guesswork.

Key Takeaways

• SharePinTweetShare0 SharesYesterday I talked about how we’ll be contributing to a Roth IRA first this year as part of our retirement plan.
• I believe that unless you have a company matching 401k contribution, a Roth IRA will usually have more investment options, have less restric...
• There are a lot of great reasons to invest in a Roth IRA,  but once we reach the $5000 contribution limit for our Roth IRA, we also wan...

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Yesterday I talked about how we’ll be contributing to a Roth IRA first this year as part of our retirement plan. I believe that unless you have a company matching 401k contribution, a Roth IRA will typically have more investment options, have less restrictions, and because it’s done with post tax dollars, you’ll never have to pay taxes on the contributions or the earnings. There are a lot of excellent reasons to invest in a Roth IRA,  but once we reach the $5000 contribution limit for our Roth IRA, we also wanted to diversify our tax situation and invest in my company 401k as well.

Today I thought I’d talk briefly about some of the 401k rules, regulations and contribution limits.

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• What Is The 401(k)?
• 401(k) Contribution Limits
• 401(k) Employer Contribution Limits
• 401k Catch-Up Contribution Limits
• Do Employer Matching Contributions Affect Your Limit?
• Other Things To Consider

What Is The 401(k)?

So what exactly is a 401(k)?  It is a retirement savings account type. From Wikipedia:

A 401(k) is a type of retirement savings account in the United States, which takes its name from subsection 401(k) of the Internal Revenue Code.  401(k)s were first widely adopted as retirement plans for American workers, beginning in the 1980s. The 401(k) emerged as an alternative to the traditional retirement pension, which was paid by employers. Employer contributions with the 401(k) can vary, but in general the 401(k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age have 401(k)-type accounts.

401(k) Contribution Limits

The 401(k) account type  has contribution limits associated with it. The 401k contribution limits have remain unchanged from 2010 to 2011.  Here is a table showing the maximum yearly contribution for the 401k account type every year since 2007.

Year401k Contribution Limit 2007$15,500 2008$15,500 2009$16,500 2010$16,500 2011$16,500 2012$17,000 2013$17,500 2014$17,500 2015$18,000 2016$18,000 2017$18,000 2018$18,500 2019$19,000 2020$19,500 2021$19,500 2022$20,500 2023$22,500

As you can see it has been increased by $1000 over the past 5 years.  No significant changes are expected for 2012, but we’ll have to wait til the end of the year to find out for sure.

401(k) Employer Contribution Limits

Numerous employers will also offer a contribution to employee’s 401(k) accounts.  Currently the employer can contribute to an employee’s 401(k), only subject to the maximum contribution of $49,000 (for 2011) for the employee.

Highly compensated employees may be subject to other restrictions put in place by an employer’s plan.

401k Catch-Up Contribution Limits

For workers who will be 50 years or older by the end of the 2011 tax year, you will also be eligible to make catch-up contributions to your 401k.  It should be noted that not all employer sponsored plans allow this, so you’ll need to check with your company’s plan to make sure it is allowed.  Here is a table with the current year’s 401k catch-up contribution limits.

Year401k Catch-Up Contribution Limit 2007-2008$5000 2009-2014$5500 2015-2019$6000 2020-2022$6500 2023$7500

Do Employer Matching Contributions Affect Your Limit?

A lot of employers will offer contributions or match your contributions to your 401(k), up to a certain percentage.  The question is - do those contributions affect the employee’s contribution limit, or is it a separate limit?  Thankfully it is a separate limit.

Example: If someone makes $100,000 in pre-tax compensation, and they and their employer both contribute the maximum, they could have $16,500 contributed by the employee, and $6,000 by the employer for a total of $22,500.   If they’re over 50 they could also make catch up contributions for a total of $28,000.

Other Things To Consider

There are other things you may need to consider with your company’s 401(k) plan.  For example, if you’re a highly compensated individual at your company you may be subject to separate contribution limits.  Some plans may allow you to make post tax contributions to your account.  Currently the max you can contribute to a401(k) plan is $49,000 or 100% of your compensation, whichever is less.

Are you currently contributing to a 401(k) plan through your work?  Are you contributing to the maximum? Do you get a company match?  Tell us what you think about the limits, and if you’ll be able to reach them.

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Final Thoughts

The bottom line: a little research on 401k contribution limits rules goes a long way. Compare your options, watch for seasonal offers, and never pay full price when a better deal is one click away.

Originally published at biblemoneymatters.com.