2016 401(k) Contribution Limits

Key facts

  • 401(k) contribution limits for employees remains at $18,000 per year for 2016.
  • Employees 50 years or older can make an additional catch-up contribution of $6,000 per year.
  • The overall contribution limit for 401(k) plans, including employer contributions, is $53,000 for those under 50 and $59,000 for those 50 and older.

The employer-sponsored 401(k) lets professionals invest a proportion of their paycheck before taxes to a retirement savings plan. Employers often make a matching contribution, which makes the plan especially popular with those planning for retirement.

However, you can’t just transfer all your spare cash into the plan. The IRS has limits in place on the amount that individuals can contribute as well as the overall contribution to the account by employees and employers. Below is a breakdown of the 401(k) contribution limits for 2016, including a summary of what’s changed since 2015.

Employee 401(k) Contribution Limits 2016

The limit on employee contributions is unchanged from 2015 and remains at $18,000 per year. Those aged 50 or older are permitted to make contributions to their 401(k) above the normal limit. If you qualify for catch-up contributions, you can defer an additional $6,000 to your plan. Some companies may place additional limits, so check with your employer on your exact allowable contribution amount.

Overall 401(k) Limits 2016

In addition to elective contributions made by individuals, employers may also offer matching contributions. Usually, an employer’s contribution will be limited to a percentage of an employee’s pre-tax contribution. For example, an employer might agree to match 50 cents on the dollar for the first 6% of salary that the employee contributes, or they may offer a dollar-for-dollar match up to a certain limit. However, there is no rule that says employers can only match employee contributions, and companies can decide for themselves how much they will add to an employee’s 401(k).

While the total 401(k) contribution limit for 2016 is $18,000 for employees, the total contribution limit including employer contributions is $53,000, or $59,000 for those aged 50 and over. These rates remain unchanged from 2015.

Employee under 50 Employee 50 or older
Employee contribution limits $18,000 $24,000
Overall contribution limits $53,000 $59,000

Why Has Nothing Changed Since 2015?

According to a statement from the IRS, “the pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment.”

It’s also worth reiterating that the above limits are IRS limits, which is likely far above the maximum contribution that could be made to your 401(k) account. For example, if your company matches 100% of your contributions (up to 5% of your salary) and you make $80,000 per year, your employer will contribute $4,000 to your plan. Even if you max out your 401(k) with an employee contribution of $18,000, your total contribution  of $22,000 will be less than half of the overall contribution limit of $53,000.


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This article is not intended as tax advice, and Wealthfront does not represent in any manner that the outcomes described herein will result in any particular tax consequence. Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances. Wealthfront assumes no responsibility for the tax consequences to any investor of any transaction. Investors and their personal tax advisors are responsible for how the transactions in an account are reported to the IRS or any other taxing authority.