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401k Contribution Limits for 2021 and 2022


Key Points

Employees will be able to funnel more money into 401k plans next year, with contribution limits increasing from $19,500 to $20,500 for 2022.
The contribution limits for individual retirement accounts (IRAs) remain unchanged at $6,000.


If you contribute to your 401k, you might wonder how much money you can contribute in total. The Internal Revenue Service (IRS) sets specific limits, such as the maximum 401k contribution limits 2021.

Whether you need a goal in your sights or have been curious about the potential amount you can contribute in total, we’ll go over these amounts. Then you’ll know exactly how much you can tell your workplace administrator to withhold from your paycheck.

As you contemplate how to get started, making the 401k contribution limits might not seem super exciting. It may even seem somewhat stressful because it means you may have a trickier time budgeting from month to month because a large portion of your income may go to saving for retirement. However, when you see how much of an impact saving the maximum amount has on your retirement savings, you’ll realize quickly that contributing the annual max 401k amount really adds up.

In this piece, we’ll review and compare the 401k contribution limits for 2021 and 2022. We’ll also go over employer-employee combination contribution limits and the highly compensated contribution limits. We’ll go over traditional and Roth IRA contribution limits as well. Let’s dive in!

401k Contribution Limits in 2021 and 2022

First, what are contribution limits? Contribution limits refer to the total amount an employee can contribute to a 401k allowable by the Internal Revenue Service (IRS). The maximum contribution amount, on the other hand, refers to the total amount of funds both the employee and employer can contribute during the year.

In the past, the 401k contributions have gone up incrementally, typically about $500 each year. For example, in 2017, the contribution limit was $18,000 and the max catch-up contribution was $6,000. The contribution limits for employees have generally gone up $500 per year since then.

Ever since the 401k was introduced, the contribution limits have been on a steady rise, except in a couple of years where the limits had to be corrected to simplify and encourage the use of 401ks.

Let’s take a look at the 401k contribution limits in 2021 and 2022:

401k Plan Limits
Comparison Between the Two Years
Maximum deferral limit for employee salaries
Catch-up contributions for workers 50+
No change
Contribution limit
No change
Contribution limit, including catch-up contribution
No change


The new amounts also apply to 403(b), most 457 and Thrift Savings Plans.

The IRS typically announces official limits for the coming year in late October or early November. You can check the IRS 401k contribution limits on the IRS website for all updates.

Employer and Employee 401k Contribution Limits

You cannot go over a specified limit for 401k contributions, which applies to the sum of elective deferrals (not catch-up contributions), employer matching contributions, employer nonelective contributions and allocations of forfeitures. We’ll define all of these below.

Elective deferrals: Elective deferrals refer to amounts of money you elect to transfer from your pay and into your employer’s retirement plan.
Employer matching contributions: Employer matching contributions refer to contributions your employer makes to your retirement plan account if you contribute to the plan from your salary. Here’s an example of a common 401k match plan formula:  50 cents on the dollar up to 6% of the employee’s pay. Not taking advantage of the match means you don’t get free money, so it’s always advantageous for you to get the match!
Employer nonelective contributions: When an employer makes a contribution to an employee in an employer-sponsored retirement plan (whether the employee contributes or not), these are employer nonelective contributions.
Forfeitures: Forfeitures hold employer contribution amounts that accrue when you leave the plan and you’re not fully vested in the plan. Vesting means that you own the money in your plan. If you’re not fully vested and you leave your job, your company can take the money in your plan.

So, knowing all the pieces of the puzzle, how much can you save in 2021? You can save a total of $58,000 maximum if you are younger than 50. However, if you’re 50 or older, you can save more due to catch-up contributions. Those 50 and older can save $64,500 in 2021, or $6,500 more than the $58,000 max for those younger than 50.

How does the catch-up contribution limit work? You can apply the catch-up contribution limit from the start of the year till the end of the year as long as you are 50 from when you start saving. Let’s say you happened to turn 50 on December 31, 2020. You can still take advantage of the catch-up contribution for the entire year.

You can use Personal Capital’s data-driven financial tools to determine how your contribution will impact your future. Take a look at Antonia’s story. Antonia considered several types of finance companies for wealth management but she enjoyed using Personal Capital’s data-driven financial tools. She could visualize how Personal Capital’s portfolio rebalancing and tax optimization worked, and she uses a great word to describe Personal Capital’s onboarding process to her friends: “seamless.”

She calls Personal Capital’s blend of technology and personal advice “more 21st century.” She added, “I don’t need a company with walnut-paneled offices. It’s a modern, intelligent approach.”

Getting a comprehensive overview of both the big picture and detailed snapshots shows you exactly what maxing out your contribution limit can do for you.

“I like how you can really drill into the portfolio to see how much money is in each sector,” Antonia added. “I like very much that the filtering is simple.”

Highly Compensated Employee 401k Contribution Limits

Highly compensated employees face different limits than non-highly compensated employees.

Who is a highly compensated employee (HCE) and how does it affect your 401k contribution limits? It’s important to know the IRS rules for 401k contribution limits. Here’s the scoop: If you own more than 5% of the interest in a business or receive compensation above a certain amount (more than $130,000 in 2021, determined by the IRS), you’re considered a highly compensated employee for 401k retirement plan purposes.

You will have to follow more stringent contribution limits. You can take a look at the IRS tests to ensure that you participate in your company plan with the right amount of money.

Traditional vs. Roth 401k Contribution Limits

Some employers offer both a traditional 401k and a Roth 401k, but what’s the difference between each? Let’s walk through the differences between both account types so you can decide which type works best for your needs.

Roth 401k: A Roth 401k refers to an employer-sponsored savings plan that gives you in which you can invest after-tax dollars for retirement. The perk to investing in a Roth 401k: You pay taxes on your money ahead of time, which means that you won’t pay any taxes on your contributions after you take withdrawals after you reach age 59 ½ as long as the account has been funded for at least five years. All of your accumulated contributions and earnings come out tax free.
Traditional 401k: A traditional 401k refers to an employer-sponsored plan that gives you the option to defer paying income tax on the amount you contribute for retirement. For example, let’s say you earn $50,000 and max out your retirement plan at $19,500. Assuming you have no other deductions, your taxable earnings will reduce from $50,000 to $30,500. ($50,000 – $19,500 = $30,500).

Wondering whether you should invest in both? You might want to take a tax-diversified approach because it could allow you to invest in many types of assets and allow you to diversify your savings. You can contribute to both a Roth and a traditional 401k plan as long as your total contribution (as an employee) doesn’t go over $19,500 in 2021 and $20,500 in 2022.

In addition to the Roth and traditional 401k, some employers also offer an “after-tax plan,” allowing you to save up to the total annual limit of $58,000. This means you can put away after-tax money and it can grow tax-deferred in your 401k account until withdrawal, at which point any withdrawn earnings become taxable.

What’s the 401k Contribution Deadline?

What is the 401k contribution deadline? The 401k contribution deadline does land at the very end of the calendar year on December 31, 2021.

However, the IRS will allow you to contribute to your IRA account right up to the tax filing deadline of the coming year — that is to say, April 15, 2022 of this next year.

The Bottom Line

It’s important to pay attention to 401k contribution limits so you don’t go over the limit or contribute too little to meet your goals.

Personal finance, including your 401k balance, involves a personal choice. (Check out where you fit in with your peers at Personal Capital’s average 401k balance by age.)

Many experts suggest saving at least 20% of your salary for your long-term investment goals. It’s also a good idea to at least contribute up to your employer match. Contributing even more beyond your employer’s match gives you a better chance of meeting your savings goals.

Read More: What is 401k Matching and How Does it Work?

Preparing for retirement is part of your overall financial plan. You can take a few actions now to get yourself on the right track.

Download 65 Ways to Retire Smart, an actionable guide with insights from fiduciary financial advisors. The guide is free.
Sign up for the Personal Capital Dashboard. Millions of people use these free and secure professional-grade online financial tools. You can use them to see all of your accounts in one place, analyze your spending, and plan for long-term financial goals.
Consider talking to a fiduciary financial advisor for more detailed guidance on your retirement saving strategies.

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Author is not a client of Personal Capital Advisors Corporation and is compensated as a freelance writer.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. Compensation not to exceed $500. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

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