Savings Contributions
Account types and their limits5 sections
Retirement savings sit in accounts that are taxed differently from one another. The differences are in when tax is paid, how much can go in, and when it can come out.
An employer plan, with the highest contribution ceiling of the common account types and often an employer match attached.
| Limit | Amount |
|---|---|
| Employee contribution, under 50 | $23,500 |
| Catch-up, 50 and over | +$7,500 |
| Total including employer | $70,000 |
2025 figures. These are set annually and change most years.
Two tax treatments
- Traditional
- Contributions reduce taxable income now. Withdrawals are taxed as ordinary income later. The comparison that decides it is your rate today against your rate then.
- Roth 401(k)
- Contributions are after tax. Qualified withdrawals are not taxed. The same comparison, in the other direction.
Only pre-tax employee deferrals reduce taxable income. An employer match is never subtracted from take-home pay, though it does count toward the total limit and toward the portfolio.
This content is educational and informational only. It is not financial, investment, or tax advice. Consult a qualified professional before making financial decisions.