# The 50% 401K matching and 100% 401K matching can make the total contribution to \$29,250 and \$39,000, respectively?

Since there is a max for our contribution of \$19,500, so (1) if a company matches 50%, that means the total max out at \$29,250?

On the other hand, (2) if a company matches 100% but only for 4.5%, that means theoretically, it can go up to \$39,000 total contribution?

But for (2), even if the salary is at \$200,000, then 4.5% is only \$9,000 so that means total contribution is \$18,000. We can contribute \$19,500 and with the \$9000 matching, it is \$28,500. In both (1) and (2), we contribute about \$19500 and the company is matching about \$10,000 -- except one situation: if the salary is really high, like \$430,000, then 4.5% of it is \$19350, and together with 100% matching, it is about \$39,000? Is that above true? It seems like it is making the rich richer.

• "It seems like it is making the rich richer" This is a benefit to a high-paid individual, are you proposing that companies don't encourage retirement and for somebody "less rich" to take that persons position? It isn't making them richer, it's about a source of income when they retire when they may not have other income. May 10 '20 at 18:48
• I thought if the person not making as much money but want to invest more in the retirement account, should be allowed to May 10 '20 at 18:49
• The 401k limits are specifically designed to prevent high-wage earners from outpacing lower-income earners (which is why the limits are a dollar amount, not percent of income). If you want to put something away without limits (depending on income), use an IRA. May 10 '20 at 18:53
• The IRA has limits. And the limits are lower and more confusing. May 10 '20 at 22:00

There are basically 3 rules for 401k contribution limits (using 2020 numbers):

1. The max an employee can defer from their paycheck is \$19,500. If the employee is over 50 years old they can defer \$6,500 more than that, or \$26,000 total.
2. The total of employee amount plus employer paid amount (either from matching or just straight paid without a matching requirement), cannot exceed \$57,000 (or \$63,500 for over 50).
3. The employer paid amounts must be the same percentage available to all employees. The maximum amount of the employee's income that can be used to calculate the employer paid amount is \$285,000.

Point 3 is what helps make it fair(er) for all employees. At least in the sense that the employer portion doesn't differ as much. Some plans may allow employees to contribute drastically differing amounts of the their own money, however.