401(k) Contribution Limits for 2022 vs. 2023

If your employer offers a 401(k) plan, it can be one of the easiest and most effective ways to save for retirement. But while a major benefit of 401(k) plans is that you can have a portion of your pay automatically deposited into your account, there are limits to how much you can contribute.

Each year, usually in October or November, the Internal Revenue Service (IRS) reviews and sometimes adjusts the maximum contribution limits for 401(k) plans, individual retirement accounts (IRAs), and other retirement savings vehicles. In October 2022, the IRS implemented updates for 2023.

Key learning points

  • Employees can contribute up to $20,500 to their 401(k) plan for 2022 and $22,500 for 2023.
  • Anyone age 50 or older is eligible for an additional catch-up contribution of $6,500 for 2022 and $7,500 for 2023.
  • The overall limit on total employer and employee contributions for 2022 is $61,000 ($67,500 with catch-up).
  • The overall limit on total employer and employee contributions for 2023 is $66,000 ($73,500 with catch-up).
  • The IRS adjusts the retirement plan contribution limits annually for inflation.

Basic limits

The basic employee contribution limit for 2022 is $20,500.This limit includes any optional employee pay deferrals, as well as any after-tax contributions deposited into a designated Roth account within your 401(k) or a Roth 401(k) plan.

The same contribution limits apply to 403(b) plans and most 457 plans, as well as the federal government’s Thrift Savings Plan.

If you have multiple 401(k) accounts, your total contribution to all of them — both traditional and Roth — can’t exceed that $20,500 limit. Any contributions you make to other types of retirement accounts, such as IRAs, will not affect your 401(k) contribution limit.

If you are 50 or older, you can enter an additional $6,500 catch-up contribution for 2022 for a total of $27,000.

The employee contribution, as described above, is $22,500 for 2023. The catch-up contribution rises to $7,500. That’s a total of $30,000.

To help employees approaching retirement add more to their tax benefit, the IRS 401(k) allows participants age 50 and older to make additional contributions above the standard contribution limit.

Employer Contributions

Another great benefit of joining a 401(k) plan is that your employer can also contribute to it on your behalf. Many employers match employee contributions by adding, say, 50 cents or $1 for every dollar the employee contributes.

Employers can also make optional contributions, regardless of how much or little the employee contributes, up to certain limits. The overall limit on total employer and employee contributions for 2022 is $61,000 or 100% of employee compensation, whichever is less. For employees age 50 and older, the base limit is $67,500, including the $6,500 catch-up contribution.

The limit on total employer and employee contributions for 2023 is $66,000. With the $7,500 catch-up contribution, that limit becomes $73,500.

Limits for high-paid workers

If you earn a very high salary, you may be considered a highly compensated employee (HCE), with stricter contribution limits. To prevent wealthier employees from unfairly taking advantage of the tax benefits of 401(k) plans, the IRS uses the Actual Deferral Rate (ADP) test to ensure that employees of all pay levels participate equally in their company’s plans.

If not highly compensated employees (NHCEs) do not participate in the business plan, the amount that HCEs can contribute may be limited.

Contributions that exceed annual limits

Evaluating your estimated contributions for the coming year and analyzing your contributions at the end of a calendar year can be very important. If you find you have contributions that exceed annual limits, the IRS requires notice by March 1 and any excess deferrals must be paid back to you by April 15.

Compare limits for 2022 and 2023

The chart below summarizes how the rules and limits for defined contribution plans (401(k), 403(b) and most 457 plans change for 2023 versus 2022.

Limits of the defined contribution plan 2022 2023 Change
Maximum delay of employee selection $20,500 $22,500 +$2,000
Employee catch-up contribution (if 50 years or older at the end of the year)* $6,500 $7,500 +$1,000
Available bounty maximum, all sources $61,000 $66,000 +$5,000
Available contribution maximum limit (if 50 years or older at the end of the year); maximum contribution from all sources, plus catch-up $67,500 $73,500 +$6,000
Workers compensation limit for calculating contributions $305,000 $330,000 +$25,000
The compensation threshold of key employees for non-discrimination testing $200,000 $215,000 +$15,000
Threshold for highly compensated employees for non-discrimination testing $135,000 $150,000 +$15,000

* The catch-up contribution limit for participants aged 50 or older is available to those over 50 at any time of the year. For example, if you were born on New Year’s Eve, it applies.

How often does the IRS change the 401(k) contribution limits?

The IRS typically makes an annual adjustment to contribution limits to reflect the effects of inflation on the value of money.

How much more can I contribute to my 401(k) for 2023 than 2022?

For the 2023 tax year, the maximum amount an employee can contribute to their 401(k) retirement plan is $22,500. That is € 2,000 more than you are allowed to contribute in 2022.

Has the IRS also increased the 2023 catch-up amounts?

Yes. While the catch-up amount for those age 50 and older was $6,500 for the 2021 and 2022 tax years, the IRS raised it to $7,500 for 2023.

It comes down to

Each year, the Internal Revenue Service (IRS) releases updates on the maximum amount employees can contribute to their 401(k) plans. For 2022, that amount is $20,500, with a catch-up contribution of $6,500 for those over 50. In all, employees can contribute a total of $27,000.

For 2023, those same maximum contribution amounts are $22,500 and $7,500, respectively, for a total of $30,000.

Make the most of your annual opportunity to save for retirement by maximizing your contribution amounts when possible. In addition, be sure to take advantage of employer contributions, if they are offered, to boost your retirement savings each year.

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