Does the 401(k) annual contribution limit include the employer match?

Here’s a question that came up recently:

Does the 401(k) annual contribution limit include or exclude the employer match?

The answer is that your employer’s matching contributions don’t count toward your maximum allowed limits. These limits are $18,000 in 2015, plus an additional $6,000 if you are over 50.

So to be clear, you can contribute up to $18,000 yourself (if under 50) and your employer can contribute funds in addition to that. There is a combined annual defined contribution limit (employee and employer together) of $53,000 for 2015.


    Jean W.

    Is it true that I can withdraw money from a ROTH IRA without paying a penalty?

      Yuval Bar-Or

      There is some truth to this. ROTH IRA accounts are funded by after tax dollars. I.e., money that has already been taxed. Thus, you may withdraw your contributions without penalties. However, any gains or earnings on those contributions have not yet ‘cleared’ the taxation hurdle, so if you withdraw them prior to age 59.5, you will be required to pay taxes on the gains and a 10% penalty. Gains/Earnings may also be taxable (and subject to 10% penalty) even after age 59.5 if your ROTH IRA account is less than five years old.

      There are some exceptions which may allow you to withdraw earnings free of tax or penalties prior to age 59.5. These include: a first home purchase or severe disability, among others. In all cases, however, the five year rule holds.

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