topic Are 401k contribution limits prorated the year I retire? in Retirement tax questions

Are 401k contribution limits prorated the year I retire?

smakbagshaw — Tue, 24 Nov 2020 14:37:17 GMT

Are 401k contribution limits prorated the year I retire? If I work less than 12 months, does the 19,500 limit need to be prorated?

Re: Are 401k contribution limits prorated the year I retire?

macuser_22 — Tue, 24 Nov 2020 15:42:50 GMT

No. The limit is for the year, not the time you work.

Re: Are 401k contribution limits prorated the year I retire?

DoninGA — Tue, 24 Nov 2020 15:45:40 GMT

Also note - https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits

Catch-up contributions for those age 50 and over

If permitted by the 401(k) plan, participants age 50 or over at the end of the calendar year can also make catch-up contributions. You may contribute additional elective salary deferrals of:

$6,500 in 2021 and 2020 and $6,000 in 2019 - 2015 to traditional and safe harbor 401(k) plans
$3,000 in 2021 - 2015 to SIMPLE 401(k) plans
These amounts are subject to cost-of-living PDF adjustments

You don’t need to be “behind” in your plan contributions in order to be eligible to make these additional elective deferrals.

Re: Are 401k contribution limits prorated the year I retire?

fanfare — Thu, 03 Dec 2020 04:30:24 GMT

since contributions must be deducted from your paycheck, leaving early is a form of prorating.

But if your paycheck is large enough you may hit the limit on your first paycheck.