Note: 401(k) salary deferral contribution limits for 2014 remain the same as for 2013.
Your 401(k) contribution limits are a combination of three things:
- Salary deferral contributions – this is money you contribute
- Catch up contributions – this is additional money you may contribute if you are age 50 or older
- Employer contributions – this is money your employer contributes and it may be subject to a vesting schedule
The 2013 and 2014 Salary Deferral 401(k) contribution limits are:
- $17,500 Salary deferral (what you the participant can contribute out of your own salary)
- $5,500 Catch up (additional 401(k) contributions allowed if you are age 50 or older)
The limits above reflect the total you as an employee can contribute to your 401(k) plan.
401(k) Total Annual Contribution Limits for 2014 Calendar Year
Total contribution limits represent the maximum contribution amount allowed including both your and your employer's contributions.
- $52,000 total annual 401(k) contribution limit if you are age 49 or younger
- $57,500 total annual 401(k) contribution limit if you are age 50 or older
The larger dollar amounts listed above represent the total maximum amount that can be contributed as a combination of both your own and your employer’s contributions. These are sometimes referred to as Section 415 limits.
401(k) for Self Employed People
If you are self-employed you can set up what is called an IndividualK or SoloK plan and contribute as an employee as well as make employer contributions in the form of a profit sharing contribution. You can learn more in 4 Best Retirement Plans for Self-Employeds.
Types of 401(k) Contributions Allowed
Many 401(k) plans allow you to put money into your plan in all of the following ways:
- 401(k) pre-tax contributions - Money goes in on a tax deductible basis. You’ll pay tax on it when you withdraw it.
- ROTH 401(k) contribution (called a designated ROTH account) - Money goes in after-tax. All gain is tax free and you pay no tax when you withdraw it.
- After-tax 401(k) contributions - Money goes in after-tax. Interest accumulates tax-deferred, but you will pay tax on any gain when you take withdrawals.
Careful analysis and tax planning should be used to determine which type or types of 401(k) contributions will be most beneficial for you. See How Much Should I Contribute to my 401(k) Plan for additional details.
Your 401(k) money is intended for retirement. Before you put money in, you ought to know the rules on how you get it back out. See What to Know Before You Cash Out Your 401(k) to learn more.
You’ll also need to consider how to invest your 401(k) money. Check out the article How to Find the Best Performing Mutual Funds to learn what to look for when you are checking out the fund choices offered by your 401(k) plan.