For the 2018 tax year, the IRS has increased the employee 401(k) contribution limit to $18,500 to keep up with the rising cost of living. This means savers who want to max out their retirement savings have the ability to contribute an additional $500 to their 401(k) account, which also translates to a greater tax break.
Here are the details about 401(k) contribution limits in 2018, and what it could mean for you.
The 2018 401(k) Contribution Limit
As I mentioned, the 401(k) contribution limit in 2018 is increasing by $500 over the 2017 limit to $18,500. This limit also applies to other qualified retirement plan types, such as 403(b) plans, most 457 plans, and Thrift Savings Plan accounts.
It's important to keep in mind that this is the limit for employee elective deferrals. This is the money you choose to have withheld from your paycheck. It does not include any non-elective contributions or matching contributions made by your employer.
In addition, there is a catch-up contribution allowed for participants who are age 50 or older, and this remains unchanged, at $6,000 for 2018. So, the maximum elective deferral any employee can choose to make for 2018 is $24,500.
The overall limit for 401(k) contributions, which includes money from all sources, including your employer's matching contributions, is rising by $1,000 to $55,000.