How Much Can You Contribute to a 401k?

A 401(k) plan allows employees to contribute a portion of their wages to individual, tax-advantaged retirement accounts. Offered by many employers, these plans are governed by the Internal Revenue Code, which dictates the amounts that can be contributed annually. Contributions are typically invested in a selection of funds chosen by the employee, and the account’s value fluctuates with the performance of those investments.

Employee Contribution Limits

The Internal Revenue Service (IRS) sets annual limits on how much an employee can contribute to their 401(k). For 2025, the elective deferral limit is $23,500. This cap applies to the total of all employee contributions to either a Traditional (pre-tax) or a Roth (after-tax) 401(k).

This contribution limit is a personal cap. If you work for more than one employer during the year and contribute to multiple 401(k) plans, your total elective deferrals cannot exceed the annual limit. You are responsible for monitoring your contributions to avoid exceeding this ceiling.

To help individuals boost their savings as they near retirement, the tax code allows for catch-up contributions. Individuals age 50 or over by the end of the calendar year can contribute an additional $7,500 in 2025. This brings their total possible contribution to $31,000 for the year.

A provision from the SECURE 2.0 Act, effective in 2025, introduces a larger catch-up contribution for individuals aged 60, 61, 62, and 63. If their plan adopts this rule, these individuals can make a higher catch-up contribution of $11,250. This amount replaces the standard $7,500 catch-up, allowing for a total employee contribution of up to $34,750.

Overall Contribution Limits

A separate, higher limit governs the total annual additions to a 401(k) account, including all contribution sources. For 2025, this limit is the lesser of 100% of an employee’s compensation or $70,000.

This total limit includes an employee’s elective deferrals, any employer matching contributions, and other employer contributions like profit-sharing. Employee catch-up contributions are not counted against this overall limit. An individual age 50 or over could have total additions of up to $77,500 in 2025 ($70,000 overall limit + $7,500 catch-up).

Consider an employee under 50 who earns $100,000 and contributes the maximum $23,500 in 2025. Their employer matches the first 6% of their salary, adding a $6,000 contribution. The total contribution of $29,500 ($23,500 employee + $6,000 employer) is well below the $70,000 overall limit.

Some plans permit after-tax contributions, which are different from Roth contributions. These non-deductible contributions also count toward the overall limit. The sum of employee deferrals, employer contributions, and after-tax amounts cannot exceed this annual cap.

Correcting Excess Contributions

Contributing more than the employee elective deferral limit leads to negative tax consequences. If not withdrawn by the tax filing deadline, the excess amount is subject to double taxation: once in the year it was contributed and again when distributed.

To fix this error, you must notify your plan administrator of the excess amount no later than April 15 of the following year. The plan will then issue a corrective distribution. This includes the excess contribution plus any investment earnings it generated.

The tax treatment for the corrective distribution is specific. The principal amount of the excess contribution is included in the employee’s gross income for the year the contribution was made. The earnings on that excess amount, however, are taxable in the year they are distributed. For example, if an excess contribution from 2025 is corrected in March 2026, the excess amount is reported on the 2025 tax return, while the earnings are reported on the 2026 tax return.