Does a Roth 401(k) Count Toward Contribution Limits?

Saving for retirement is a significant financial objective. Employer-sponsored 401(k) plans are a popular method for retirement savings. These plans offer various tax advantages, such as tax-deferred growth on contributions and earnings, or tax-free withdrawals in retirement for Roth accounts. Understanding contribution rules is important for maximizing savings potential.

Understanding 401(k) Contribution Limits

The Internal Revenue Service (IRS) establishes annual limits on 401(k) contributions. These limits apply to elective deferrals, which are employee contributions from paychecks. For the 2025 tax year, the maximum amount an employee can contribute to a 401(k) plan is $23,500. This limit, outlined in Internal Revenue Code Section 402(g), applies to total elective deferrals across all 401(k), 403(b), and 457 plans.

Individuals aged 50 and over are eligible to make additional “catch-up” contributions beyond the standard annual limit. This allows those nearing retirement to accelerate savings. For 2025, the standard catch-up contribution amount is $7,500. This means an employee aged 50 or older can contribute up to a combined total of $31,000 in elective deferrals for the year.

An enhanced catch-up contribution applies for individuals aged 60, 61, 62, or 63. For 2025, this age group can contribute up to $11,250 as a catch-up amount. This higher limit, implemented under the SECURE 2.0 Act, allows eligible participants to contribute a total of $34,750 to their 401(k) plans in 2025. These catch-up contributions are separate from the primary elective deferral limit.

How Roth 401(k) Contributions Apply

Roth 401(k) contributions share the same annual elective deferral limit as traditional pre-tax 401(k) contributions. Any money designated as a Roth 401(k) contribution counts directly towards this overall employee deferral limit. For instance, if the annual elective deferral limit is $23,500, an employee cannot contribute $23,500 to a traditional 401(k) and an additional $23,500 to a Roth 401(k) in the same year.

The combined total of traditional 401(k) contributions and Roth 401(k) contributions cannot exceed this single limit. There is no separate contribution limit for Roth 401(k)s. The limit applies to the sum of all employee elective deferrals, regardless of pre-tax or Roth basis.

Once the combined elective deferral limit, including catch-up contributions, is reached, an employee cannot make further salary contributions to their 401(k) accounts for that tax year. This unified approach ensures that all employee contributions are subject to the same statutory caps. Adhering to this combined limit complies with IRS regulations and avoids potential penalties.

Employer Contributions and the Total Limit

Employer contributions to a 401(k) plan differ from employee elective deferrals. These contributions, including matching or profit-sharing contributions, do not count towards the employee’s annual elective deferral limit. Employers can contribute to an employee’s account without impacting the employee’s ability to maximize their own deferrals.

While employer contributions do not affect the employee’s elective deferral limit, an overarching limit applies to the total amount contributed to a participant’s 401(k) account from all sources. This comprehensive cap, known as the “annual additions” limit, includes employee elective deferrals, employer matching contributions, employer profit-sharing contributions, and allocated forfeitures. This limit is set under Internal Revenue Code Section 415(c).

For the 2025 tax year, the annual additions limit for defined contribution plans is $70,000. This figure is higher than the employee elective deferral limit, allowing for substantial total contributions when employee and employer contributions combine. For individuals aged 50 and over, including catch-up contributions, the total annual additions limit can reach $77,500. This overall limit ensures the sum of all contributions to a participant’s account remains within IRS guidelines.