401(k) Contribution Limits refer to the maximum amount of money that an individual can contribute to their 401(k) retirement savings plan within a given tax year.
For the tax year 2023, the limit for employee contributions is $22,500, with an additional catch-up contribution of $7,500 allowed for individuals aged 50 and older, bringing their total possible contribution to $30,000.
These limits are periodically adjusted for inflation by the Internal Revenue Service (IRS). The contributions made to a 401(k) are typically made on a pre-tax basis, reducing the individual’s taxable income in the year they are made, though certain plans may also allow for after-tax contributions.
It’s important for individuals to be aware of these limits to maximize their retirement savings while ensuring compliance with IRS regulations.
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