2022 vs 2021 Maximum 401k Contribution Limits

[Updated with official IRS 2022 401k limits] The IRS has now released 2021 401k limits in Notice 2021-61, which as expected see a moderate change from 2021 levels. The table below shows what the contribution limits for 2022 versus 2021 (current tax year) will be at the individual/employee level.

Year
401K Contribution Limit
Maximum Employer Contribution
Max. for ALL Contributions (excl. Catch-up)
Additional Catch-up Amount (age > 50)
2022
$20,500
$40,500
$61,000
$6,500
2021
$19,500
$38,500
$58,000
$6,500
2020
$19,500
$37,500
$57,000
$6,500
2019
$19,000
$37,000
$56,000
$6,000
2018
$18,500
$36,500
$55,000
$6,000

Key highlights include:

  • $1,000 increase to the employee elective deferral limit, meaning the maximum an employee can contribute to 401k plans across the year in 2022 will rise to $20,500
  • Highly compensated employee threshold increased by $5,000 to $135,000
  • Catch-up contributions for those over 50 remains at $6,500

Click here for the full set of 401K, Roth IRA and Traditional IRA Contribution Limits

Employer Contribution Component

A lot of people assume the maximum annual contribution to employer sponsored retirement plans like a 401(k), 403(b) or Government Thrift Savings Plan (TSP), are what is published at the individual level. However, this could be very misleading if your employer contribution or match is generous and/or you are a high income earner.

Let me give you an example to illustrate my point. Suppose Mike works for an employer who matches 100% of contributions – and there are quite a lot of employers who offer generous matching to attract talent. Mike earns $200,000 a year as Senior Director or IT.

He contributes to his employer sponsored 401k plan up to the individual maximum of $18,000 per year.  However because his employer matches his contribution his total non-taxable contribution for that year is a whopping $36,000. Well above his individual contribution and add make a substantial to his retirement savings.

The point being is that don’t just look at the individual contribution limits (which change every year). Consider the grand total and where possible make sure you employer provides as generous a contribution as possible. Or if picking a new employer, look closely at their matching 401K contribution to try and get the maximum match.

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