Is There a Limit on Roth 401k Contributions?

A Roth 401(k) is an employer-sponsored retirement savings plan that uses after-tax contributions. This means contributions are made with dollars on which income tax has already been paid. A key advantage is that qualified withdrawals in retirement, including earnings, are entirely tax-free. This contrasts with traditional 401(k)s, where contributions may be tax-deductible, but withdrawals are subject to income tax.

The Internal Revenue Service (IRS) establishes specific annual contribution limits for Roth 401(k)s. These limits maintain the tax-advantaged nature of these retirement accounts. The IRS adjusts these thresholds annually to account for inflation.

Employee Elective Deferral Limits

The primary annual limit on an employee’s own contributions to a Roth 401(k) is the elective deferral limit. For the 2025 tax year, this limit is $23,500. This amount represents the maximum an individual can contribute from their salary to a Roth 401(k), a traditional 401(k), or a combination of both. It applies to the employee’s personal contributions only, not to any employer contributions.

This elective deferral limit is a cumulative cap across all 401(k) plans an individual participates in during a given year. If an individual works for multiple employers or changes jobs mid-year, their combined contributions to all 401(k) plans, including Roth and traditional versions, cannot exceed this $23,500 threshold for 2025. It is the individual’s responsibility to monitor contributions across different plans to ensure compliance.

An “elective deferral” refers to the portion of an employee’s salary they choose to have withheld and contributed directly to their retirement plan, rather than receiving it as current taxable income. These limits apply regardless of an individual’s income level, unlike some other Roth retirement vehicles. The employee’s direct salary deferrals are strictly capped by this IRS regulation. Individuals must ensure their payroll deductions align with these limits to avoid potential issues.

Catch-Up Contributions

Individuals aged 50 and over can make additional contributions to their Roth 401(k)s, known as catch-up contributions. These contributions help older workers bolster their retirement savings as they approach retirement age. Eligibility is determined by the individual’s age by the end of the calendar year for which the contribution is made.

For the 2025 tax year, the standard catch-up contribution limit for those aged 50 and older is $7,500. This amount is in addition to the standard employee elective deferral limit. An eligible individual aged 50 or over can contribute a total of $31,000 ($23,500 standard deferral + $7,500 catch-up) to their Roth 401(k) in 2025.

Beginning in 2025, individuals aged 60, 61, 62, or 63 can make a higher catch-up contribution. For this specific age bracket, the enhanced catch-up contribution limit is $11,250 for 2025, provided their plan allows for it. This means eligible individuals in this age range could contribute up to $34,750 ($23,500 standard deferral + $11,250 enhanced catch-up) in 2025.

Individuals should confirm with their plan administrator whether their specific 401(k) plan permits these enhanced catch-up contributions, as not all plans may immediately adopt this provision.

Overall Contribution Limits

Beyond the employee’s direct elective deferrals and catch-up contributions, there is a separate overall limit on the total annual contributions to a Roth 401(k) plan. This comprehensive limit includes the employee’s elective deferrals, any applicable catch-up contributions, and all employer contributions. Employer contributions can include matching funds, profit-sharing contributions, or other discretionary contributions.

For the 2025 tax year, the total combined contribution limit for employee and employer contributions to a 401(k) (including Roth 401(k)s) is $70,000 for individuals under age 50. This limit applies to the sum of all contributions from both the employee and the employer. For example, if an employee contributes the maximum elective deferral of $23,500, the employer could contribute up to an additional $46,500 ($70,000 – $23,500) without exceeding the overall limit.

For employees aged 50 or older, the overall limit is higher to accommodate catch-up contributions. For those aged 50 to 59 or 64 and older, who can make the standard $7,500 catch-up contribution, the total combined limit for 2025 is $77,500 ($70,000 + $7,500). If an employee falls within the 60-63 age bracket and is eligible for the enhanced $11,250 catch-up contribution, the total combined limit for 2025 can reach $81,250 ($70,000 + $11,250).

Even if an employee does not contribute the maximum allowed elective deferral, the overall limit still applies to the combined contributions from all sources. If an employee contributes less than their individual maximum, but the employer’s contributions are substantial, the combined amount could still reach or exceed the overall limit. This comprehensive limit prevents excessive amounts from being sheltered in tax-advantaged accounts.

Managing Excess Contributions

Contributing more than the allowed limits to a Roth 401(k) results in an “excess deferral” or “excess contribution.” This situation can arise if an individual contributes more than the elective deferral limit across all their plans, or if the combined employee and employer contributions exceed the overall limit. If an excess contribution occurs, corrective action is necessary to avoid adverse tax consequences.

The procedure for correcting an excess deferral involves distributing the excess amount, along with any earnings attributable to that excess, back to the participant. The deadline for this corrective distribution is April 15 of the year following the year the excess contribution was made. This deadline is fixed and is not extended by filing an extension for one’s individual income tax return.

If the excess deferral, plus its earnings, is distributed by the April 15 deadline, the excess amount is included in the participant’s gross income for the year it was originally contributed. The earnings on the excess are taxed in the year they are distributed. This timely correction helps avoid double taxation and additional penalties. The employer or plan administrator will issue a corrected Form W-2 and a Form 1099-R to report these distributions to the IRS.

Failure to correct an excess deferral by the April 15 deadline can lead to tax implications. The excess amount will be taxed twice: once in the year it was contributed and again when it is eventually distributed from the plan. If the excess is not timely distributed, it may be subject to a 10% early distribution penalty if the participant is under age 59½. It is advisable to contact the plan administrator immediately upon realizing an overcontribution to initiate the correction process.