Money Girl Q & A: Does the 401(k) Contribution Limit Include Employer Matching?

 Money Girl explains employer matching and 401(k) contribution limits. 

Laura Adams, MBA
1-minute read

Money Girl Q & A: Does the 401(k) Contribution Limit Include Employer Matching?

Q. This year I plan on maxing out my 401(k) by contributing $17,000. However, my employer matches contributions up to 3% of my salary. Does that mean the total of both of our contributions must not exceed $17,000?

A. No, you can always contribute the allowable maximum for retirement plans set by the IRS each year, regardless of the amount of matching funds your employer also contributes. 

For 2012, the employee contribution limit is $17,000. So, let’s say you earn $50,000, max out your 401(k), and get a 3% match. You would contribute $17,000 and your employer would contribute $1,500 ($50,000 x 3%), for a grand total of $18,500 in your retirement account—not bad!

And here’s good news: For 2013, you’ll be able to put away even more for retirement due to an increase in the cost-of-living index. The new limit will be $17,500 for those who participate in a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. However, the additional catch-up contribution for workers age 50 and over remains unchanged at $5,500.

More Links You Might Like:
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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlersbook is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.