2017 401(k) Contribution Limits, Rules, and More
Only Minor Changes in 401(k) Limits for 2017
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. Use your age as of the end of the calendar year.
- Employer contributions–This is money your employer contributes and it may be subject to a vesting schedule
There are two types of limits—a limit on the maximum amount you can contribute as a salary deferral—and a limit on the amount of total contributions which includes both your and your employer's contributions.
Both limits are explained below.
2017 Salary Deferral 401(k) Contribution Limits
- $18,000 Salary deferral (what you the participant contribute out of your own salary)
- 6,000 Catch up (additional 401(k) contributions allowed if you are age 50 or older. Use your age as of the end of the calendar year.
The limits above reflect the total you as an employee can contribute to your 401(k) plan. There is no change from 2016.
401(k) Total Annual Contribution Limits for 2017
Total contribution limits represent the maximum contribution amount allowed including both your and your employer's contributions.
- $54,000 total annual 401(k) contribution limit if you are age 49 or younger
- $60,000 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.
The age 49 and younger limit above is what is called a Section 415 limit. The catch-up contributions can be made in addition to the Section 415 limit, which is what makes the age 50 total contribution limit equal to the Section 415 limit plus the maximum allowable catch-up contribution.
In addition to the allowable contribution amounts above sometimes you can contribute additional amounts to other types of plans, like a 457 plan, a Roth IRA, or a non-deductible IRA.
It all depends on your income and the types of plans available to you.
401(k) for Self-Employed People
If you are self-employed you can set up what is sometimes called an Individual K or Solo K plan. This allows you to contribute salary deferral contributions as an employee and make profit sharing contributions as the employer.
Types of 401(k) Contributions the IRS Allows
Many 401(k) plans allow you to put money into your plan in all of the following ways:
- 401(k) pre-tax contributions–Money is put 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-taxes are paid. All gain is tax-free and you pay no tax when you withdraw it.
- After-tax 401(k) contributions–Money goes in after-taxes are paid. Interest accumulates tax-deferred, but you will pay tax on any gain when you make withdrawals. These after-tax contributions can be rolled to a Roth IRA when you retire.
How Much Should I Contribute to My 401(k)?
Most of the time, at a minimum, you want to contribute enough to your 401(k) to receive all employer matching contributions that are available to you. Careful analysis and tax planning should be used to determine which type or types of 401(k) contributions (i.e., deductible contributions or Roth contributions) will be most beneficial for you.
How Should I Invest My 401(k) Money?
You’ll also need to consider how to invest your 401(k) money. Most 401(k) plans offer Target Date Funds, where you pick a fund with a calendar year closest to your desired retirement year. These funds also have model portfolios you can choose, online tools to help you assess how much risk you want to take, and what fund choices will match up best.
How Do I Get Money Out of My 401(k)?
Your 401(k) money is intended for retirement. It is not easy to take money out (without incurring a steep financial loss) while you are still working. It is structured that way on purpose so you are forced to let the money grow for your future use.
Past 401(k) Salary Deferral Contribution Limits
|Year||Salary Deferral||Catch Up|