Number of the day: 2021’s 401(k) contribution limit

Here’s how much individuals can defer into their retirement account next year—and what it means to HR leaders.
By: | November 18, 2020 • 2 min read


$19,500: The limit individuals will be able to contribute into a 401(k), 403(b) and most 457 plans in 2021

Retirement contribution limits will remain the same next year with employees being able to defer up to $19,500 into a 401(k), 403(b) and most 457 plans at work, the IRS announced recently. The limits also remain the same for employee catch-up contributions for those 50 and older—$6,500. Last year saw a $500 jump in the overall employee contribution limit for 2020 plus a $500 rise in the catch-up limit.

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What it means to HR leaders

Thresholds are adjusted annually for inflation and are usually announced around the time when employees are enrolling in benefits.

Related: IRS announces 401(k), FSA contribution limits for 2021

Although employee contribution limits for 401(k)s will remain the same next year, HR managers should still make sure to convey the limits to workers for next year. Many industry insiders also say employers should encourage employees to fund their 401(k)s to the best of their ability. Contributing to retirement accounts—and increasing contributions over time—is important to long-term savings, even during market volatility.

“It’s good guidance for employers to tell workers that any savings they can do today will have an outsize benefit, and it’s important [employees] exercise their option to contribute to this employer plan,” Edward Gottfried, group product manager for Betterment for Business, a provider that works with 500 employer clients, told HRE earlier this year.

Kathryn Mayer is HRE’s benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver. She can be reached at kmayer@lrp.com.