401(k) Company Match Limits for 2021

This story was last updated March 24, 2021

As one of the most common types of employer-sponsored retirement accounts in the U.S., a 401(k) is an attractive option for many job seekers. However, it’s just one of many types of retirement accounts, and the way it is handled isn’t standardized nationwide. Some employers will allow their employees to contribute a certain part of their salaries to a 401(k) up to a certain limit; others will match the employee’s contribution.

Think of a 401(k) match as a retirement bonus from your job. Before we delve into 401(k) company match limits for 2021, there are a few important things you should know.

What is a 401(k)?

A 401(k) is an employer-sponsored savings plan specifically designed for retirement. As such, you don’t pay taxes on the money you’ve saved until you withdraw it. 401(k)s were originally designed to supplement pensions and came about in the 1980s. Today, pensions are generally not part of a benefits package in several industries, so 401(k)s have surged in popularity as a result.

With a 401(k), you decide how you want your money to be invested within this account. Generally speaking, most 401(k)s feature a variety of mutual funds that themselves contain money market investments, stocks, and bonds. The closer you get to retirement age, the more conservative these investments become to help further protect your savings at a cost of more rapid growth.

With that being said, 401(k)s come with a lot of restrictions. For example, you normally have to work at a company for a certain number of months before you can access the matched funds in your 401(k). This is designed to help keep skilled and talented employees on board with the company. If you’re considering withdrawing funds from your 401(k), it’s a good idea to consult with a financial advisor to determine which specific rules and regulations might apply to your situation.

How employer matching works

With employer matching, your employer will match your 401(k) contribution up to a certain match limit. Employers rarely match all of your contributions, and even if they do, there’s a limit on how much you, as an individual, can contribute. The most common employer matching scheme is for the employer to match the first 6% of your contributions every year.

Because plans vary dramatically from company to company, it’s a good idea to talk to your HR department or your employer to learn precisely how much they’ll match. Depending on your earnings, this amount can change from year to year as well. But even if your employer only matches part of your 401(k) contribution, it’s still a smart idea to contribute as much as you can, since all of those savings are tax-deferred in the meantime.

What are the maximum 401(k) company match limits for 2021?

Although the “first 6% rule” is expected to remain about average in 2021, some employers can be especially generous. To account for inflation, retirement plan contribution limits can change. Although inflation projected to increase in 2021 vs. 2020, contribution maximums will hold steady at $19,500 per employee. For those aged 50 and up, the “catch up contribution limit” will hover around $6,500.

In 2021, the employer and employee contribution limits will increase slightly and come to a grand total of $58,000. If you are a highly compensated employee (an HCE), your minimum contribution in 2020 will remain at $130,000 in 2021.

In 2021, the employer and employee contribution limits will increase slightly and come to a grand total of $58,000. If you are a highly compensated employee (an HCE), your minimum contribution in 2020 will remain at $130,000 in 2021.

How much do companies usually match in 401(k)s?

Normally, the standard company matching amount is 6%, but this depends on your salary and other factors. The only real way to know for sure is to look at your 401(k) materials. The numbers may change over the years. If you’d like to know more about your 401(k) options, it’s a good idea to speak with your HR representative.