The IRS sets the retirement contributions each year, according to the IRS. Limits vary based on the type of retirement account, such as an individual retirement account, 401(k) or 403(k).Continue Reading
There are four main types of employee contributions, including the salary reduction contributions, designated Roth contributions, catch-up contributions and after-tax contributions, says the IRS. IRAs, which typically fall under either salary reduction or catch-up contributions, have a limit of $5,500 or $6,500 for someone 50 and older for the 2015-2016 year. This limit is for traditional and Roth IRAs combined. The number is an annual maximum number before potential catch-up contributions for seniors.
With the traditional 401(k) plans, the 2015-2016 contribution limit is $18,000 for the year, according to the IRS. If cost-of-living adjustments are made in the future, the contribution limits may go up. There is a smaller contribution limit for the Simple 401(k) plan at $12,500 a year. There are also some catch-up contribution limits for people who are 50 and older who haven't contributed enough by this point to their retirement plans. This allows additional contributions at the end of the year. The traditional and safe harbor 401(k) plans allow an additional $6,000, and the Simple 401(k) plan allows an additional $3,000.Learn more about Financial Planning