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 401(k) contribution limits are listed below.
2013 401(k) CONTRIBUTION LIMITS
401(k) Salary Deferral Contribution Limits for 2013
- $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)
401(k) Total Annual Contribution Limits for 2013 Calendar Year
- $51,000 Total annual 401(k) contribution limit if you are age 49 or younger
- $56,500 Total annual 401(k) contribution limit if you are age 50 or older
The 401(k) contribution limits above show you how the maximum amount you are allowed to put in your 401(k) plan, and the total maximum amount that can be contributed as a combination of both your own and your employer’s contributions.
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.