/ Investing

# Retirement Account Contribution Limits

All of these numbers are for the 2019 tax year, but the important takeaways of this post are not the actual amounts but the rules surrounding them (which accounts you can maximize simultaneously, that income limits exist for contributing to certain accounts, etc).

# Personal IRA

• Contribution max: $6000 • All of your personal IRAs share the same contribution space. You cannot contribute$6000 to a traditional IRA and $6000 to a Roth IRA. ## Traditional IRA You can always contribute to IRAs at any income level, but if you or your spouse are covered by a workplace retirement plan, you can only deduct your contribution if your income is below a certain MAGI. You can find the MAGI thresholds here. ## Roth IRA You can only contribute to Roth IRAs if your income is below a certain threshold. If you are above the threshold, you should consider the backdoor Roth. # 401(k) • Contribution max:$19,000 as an employee younger than 50. Any employer match is not subject to this limit (as seen later). This limit is combined across all 401(k)s (and 403(b)s, more on that later) you might have:

Generally, you aggregate all elective deferrals you made to all plans in which you participate to determine if you have exceeded these limits.

• Additional catch up contribution limit for employees of at least 50 years of age: $6000. However, no 401(k) is legally required to allow you to make catch up contributions. If permitted by the 401(k) plan, participants who are age 50 or over at the end of the calendar year can also make catch-up contributions. The additional elective deferrals you may contribute is: •$6,000 in 2015 - 2019 to traditional and safe harbor 401(k) plans
• $3,000 in 2015 - 2019 to SIMPLE 401(k) plans These amounts may be increased in future years for cost-of-living adjustments. You don’t need to be “behind” in your plan contributions in order to be eligible to make these additional elective deferrals. • [Emphasis added] • Contribution max:$56,000 for employer + employee contributions, not including catch up contributions, per 401(k)

Total annual contributions (annual additions) to all of your accounts in plans maintained by one employer (and any related employer) are limited. The limit applies to the total of:

• elective deferrals (but not catch-up contributions)
• employer matching contributions
• employer nonelective contributions
• allocations of forfeitures

The annual additions paid to a participant’s account cannot exceed the lesser of:

• 100% of the participant's compensation, or
• $56,000 ($62,000 including catch-up contributions) for 2019; $55,000 ($61,000 including catch-up contributions) for 2018.
• If you have a solo 401(k) from a side hustle, and a W-2 job that also provides a 401(k), you could contribute $19,000 as an employee to your employer's 401(k), and then contribute up to$56,000 to your solo 401(k) as an employer (where you are your own employer)
• The $56,000 contribution limit is also applicable for the megabackdoor Roth. Keep in mind that employer contributions, including matches, eat into the$56,000 limit

# 403(b)

• Contribution max: $19,000 as an employee under 50 and without 15 years of service. These limits are always the same as the 401(k), and share the same contribution space as the 401(k). You cannot max out a 401(k) and a 403(b) simultaneously. From the IRS Employees must combine contributions made to their 403(b) accounts with contributions made to all other plans in which they participate (other than 457 plans): 401(k)s and other qualified plans, and SIMPLE IRAs. The employee's total elective deferrals to all of these plans combined cannot exceed the annual deferral limit ($19,000 in 2019 and $18,500 in 2018) • Additional catch up contribution limit for employees of at least 50 years of age:$6000. This limit is always the same as that of the 401(k). Also, like the 401(k), a 403(b) does not have to accept catch up contributions.

• Additional catch up contribution limit for employees with at least 15 years of service with certain employers: up to $3000: If permitted by the 403(b) plan, an employee who has at least 15 years of service with a public school system, hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization), has a 403(b) elective deferral limit that is increased by the lesser of: 1.$3,000,
2. $15,000, reduced by the amount of additional elective deferrals made in prior years because of this rule, or 3.$5,000 times the number of the employee’s years of service for the organization, minus the total elective deferrals made for earlier years.
• Like the general catch up contributions, a 403(b) can refuse to accept these 15 years of service catch up contributions
• Because of the "lessor of" clause and 2), no more than $15,000 of total additional catch up contributions can be made under this provision, with no more than$3,000 per year
• But notice how 3) says total elective deferrals made in earlier years, not additional elective deferrals like in 2). I assume that the $5,000 figure in 3) is also inflation adjusted. Based on previous 403(b) contribution limits[1], if you had 15 years of service at an employer with this 403(b) provision, and had contributed at least 30.4% of the 403(b) contribution max each year for the last 15 years, the figure from 3) would be$0, disallowing you from any additional contributions through this provision. A diligent saver does not benefit from this 15 years of service provision
• When both catch up provisions apply (the one for being at least 50 years old, and this 15 years of service provision), the 15 years of service provision is used first

While the age 50 catch-up is subject to an annual limit, the 15-year catch-up is subject to a use test, lifetime limit and an annual limit. When both catch-up opportunities are available, the law requires deferrals exceeding the standard limit ($19,000 in 2019 and$18,500 in 2018) to be first applied to the 15-year catch-up (to the extent permitted), and then to the age 50 catch-up.

• Contribution max: $56,000 (just like 401(k)s) for employer + employee contributions, not including catch up contributions, per 403(b) # 457(b) • The employee contribution limits are the same as the 401(k), but do not share the same contribution space as the 401(k). You can max out both accounts simultaneously. The amount of salary deferrals you can contribute to retirement plans is your individual limit each calendar year no matter how many plans you're in. This limit must be aggregated for these plan types: • 401(k) • 403(b) • SIMPLE plans (SIMPLE IRA and SIMPLE 401(k) plans) • SARSEP If you’re in a 457(b) plan, you have a separate limit that includes both employee and employer contributions. • [Emphasis added] • However, employer contributions share the same$19,000 space as employee contributions

A 457(b) plan’s annual contributions and other additions (excluding earnings) to a participant’s account cannot exceed the lesser of:

• 100% of the participant's includible compensation, or
• the elective deferral limit ($19,000 in 2019 and$18,500 in 2018).
• Notice how it says a plan's annual contributions, not an employee's contributions
• Governmental 457(b)s can choose to accept catch up contributions from employees that are 50 or older, with the same limits as 401(k)s and 403(b)s: $6000 in 2019 • There's an additional optional catch contribution provision Special 457(b) catch-up contributions, if permitted by the plan, allow a participant for 3 years prior to the normal retirement age (as specified in the plan) to contribute the lesser of: • Twice the annual limit$38,000 in 2019 and $37,000 in 2018, or • The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions) # SIMPLE IRA • Contribution max:$13,000 as an employee
• As mentioned earlier, this contribution limit is shared with 401(k)s and 403(b)s.
• If you were to work two jobs, one that offers a SIMPLE IRA and one that offers a 401(k), you could max out a SIMPLE IRA with $13,000 and contribute an additional$6,000 to your 401(k).
• Additional catch up contribution limit for employees of at least 50 years of age: \$3000

Retirement Account Contribution Limits