Can Both Spouses Max Out Their 401k Plans?
Understand how 401k contribution limits work on an individual basis, enabling married couples to build a more effective joint retirement and tax strategy.
Understand how 401k contribution limits work on an individual basis, enabling married couples to build a more effective joint retirement and tax strategy.
A frequent question for married couples is how 401(k) contribution limits apply when both spouses have access to a plan. Many wonder if the limit is for the household or for each individual. The rules governing 401(k) contributions for married couples allow each partner to independently save for retirement.
The contribution limits for 401(k) plans are applied on a per-person basis, not per household. This means that if both spouses have a plan, they can each contribute up to the maximum amount allowed by the Internal Revenue Service (IRS) each year.
For 2025, the IRS has set the employee contribution limit, also known as the elective deferral limit, at $23,500. This means a married couple where both spouses are under age 50 can contribute a combined total of $47,000 to their separate 401(k) accounts.
Individuals age 50 and over can make additional “catch-up” contributions, which for 2025 is $7,500. If both spouses are age 50 or older, they can each contribute an additional $7,500 to their own plans. A special provision for 2025 allows those aged 60 to 63 to make a higher catch-up contribution of $11,250.
Many employers offer to contribute to their employees’ 401(k) plans, which can take the form of matching contributions or profit-sharing. Employer matching contributions are funds the company adds to your account, calculated as a percentage of your own contributions. Profit-sharing is a contribution the employer can make regardless of whether you contribute yourself.
These employer-provided funds do not count against your personal annual elective deferral limit of $23,500 for 2025. Instead, there is a separate, much higher overall limit that caps the total of all contributions to your 401(k) in a year. This includes your own deferrals, any employer matching funds, and any employer profit-sharing.
For 2025, this overall limit is $70,000. This means the sum of what you and your employer contribute to your plan cannot exceed this amount or 100% of your compensation, whichever is less. For example, if you contribute $23,500 and your employer adds $10,000 in matching funds, your total contributions for the year are $33,500, which is well below the $70,000 overall cap.
If one spouse does not have access to a workplace retirement plan like a 401(k), the couple can use a Spousal Individual Retirement Arrangement (IRA). This allows a working spouse to contribute to an IRA on behalf of a non-working or low-earning spouse.
To be eligible to contribute to a Spousal IRA, the couple must file a joint tax return. The contributing spouse must have enough earned income to cover the contributions for both themselves and their spouse.
For 2025, the annual contribution limit for an IRA is $7,000. This means the working spouse can contribute up to $7,000 to their own IRA and another $7,000 to the Spousal IRA, for a total of $14,000. If the non-working spouse is age 50 or over, they are also eligible for the IRA catch-up contribution of $1,000, allowing for a total Spousal IRA contribution of $8,000.
Contributing to traditional 401(k) plans can lower a married couple’s tax liability on a joint return. Contributions are made with pre-tax dollars, which reduces your household’s Adjusted Gross Income (AGI) and in turn lowers your overall tax bill for the year.
For example, consider a couple with a combined gross income of $150,000. If both spouses contribute the maximum of $23,500 each, their combined $47,000 in contributions reduces their taxable income to $103,000. This can result in significant tax savings.
Couples also have the option of contributing to a Roth 401(k) if their employers’ plans offer it. Contributions to a Roth 401(k) are made with post-tax dollars, so they do not provide an upfront tax deduction like a traditional 401(k). The benefit of a Roth account is that qualified withdrawals in retirement are completely tax-free, offering tax diversification for future planning.