401K Contribution Limits 2020
How Much Can you and Your Employer Contribute to Your 401K?
Highlights of changes for 2020
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $19,000 to $19,500.
Each year the IRS publishes updated Maximum 401K contribution limits, as well as catch-up contribution limits for the new year. Typically, the limits the IRS sets each year is based on inflation factors (with minimum $500 increases), so they do not necessarily increase the limit each year.
The 401K Max Contribution Limit for 2020 has now been set, with a $500 increases over 2019 to $19,500. The Maximum 401K contribution Limit for 2018 and 2019 was $18,500 and $19,000, respectively.
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As you can see, the Maximum 401K contribution limits do not rise dramatically each year. Although over time, if investors are diligent about increasing their contributions, it can certainly make a difference. The limit on contributions for 401K, 403B, most 457 plans, and the Federal Government Thrift Savings Plan (TSP):
401K Contribution Limit History | |||
|---|---|---|---|
| 2020 | $19,500 | 2013 | $17,500 |
| 2019 | $19,000 | 2012 | $17,000 |
| 2018 | $18,500 | 2011 | $16,500 |
| 2017 | $18,000 | 2010 | $16,500 |
| 2016 | $18,000 | 2009 | $16,500 |
| 2015 | $18,000 | 2008 | $15,500 |
| 2014 | $17,500 | 2007 |
$15,000
|
For those of you that are over age 50 (or turn age 50 before the end of the year), you are allowed an additional 401K catch-up contribution. These limits also adjust for inflation, but at a much slower pace. Until 2020, the $500 increase to $6,000 for 2015 was the first 401K catch up increase since 2009. For 2020, there is an additional $500 increase to $6,500:
Age 50+ 401K Contribution Catch-Up | |||
|---|---|---|---|
| 2020 | $6,500 | 2013 | $5,500 |
| 2019 | $6,000 | 2012 | $5,500
|
| 2018 | $6,000
|
2011 | $5,500
|
| 2017 | $6,000
|
2010 | $5,500
|
| 2016 | $6,000
|
2009 | $5,500
|
| 2015 | $6,000
|
2008 | $5,000 |
| 2014 | $5,500 | 2007 | $5,000
|
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This means that in 2020, for those over age 50, the maximum allowable employee 401K contribution is $26,000. This amount includes the $19,500 regular 401K contribution, plus the $6,500 over-50 catch-up.
In addition to total allowable employee 401K contributions, there is a maximum total contribution allowed into your 401K (when factoring in employer match). For 2020, the maximum allowed to be contributed into your 401K has increased from $56,000 to $57,000 (or 100% of income, whichever is greater) with minimum $1,000 increases thereafter. Therefore, with employee standard contributions, potential over-50 “catch-up” contributions, plus employer contributions, the maximum overall contributions are $63,500 in 2020.
About Robert Henderson and Lansdowne Wealth Management
Robert Henderson is the President of Lansdowne Wealth Management, an independent, fee-only advisory firm in Mystic, CT. His firm specializes in financial planning and investment management for retirement, with a special focus on the particular needs of women that are divorced or widowed. He is an Accredited Asset Management Specialist and a Certified Divorce Financial Analyst. Mr. Henderson can be reached at 860-245-5078 or bhenderson@lwmwealth.com. You can also view his personal finance blog, The Retirement Workshop at https://lwmwealth.com/blog and the firm’s website at https://LWMwealth.com.
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