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If you’re looking to boost your retirement savings next year, the new 401(k) contribution limits can help make it easier. This month, the IRS announced 2025 inflation-adjusted limits for retirement accounts, and the 401(k) limits are higher than ever.
If you’ve delayed making contributions in the past or only contributed minimally, you might want to consider stepping it up a notch. Here’s what you need to know for 2025.
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401(k) contribution limits are increasing in 2025
Having access to a 401(k) is one of the top perks you can score from your job. This employer-sponsored retirement plan not only helps you grow your savings but can also lower your tax bill. Some employers sweeten the deal with a 401(k) match, giving you extra money toward retirement.
However, it’s important to keep tabs on the annual contribution limits so you can plan accordingly. For 2025, the annual employee contribution limit for 401(k) plans is set to increase from $23,000 in 2024 to a record high of $23,500. That’s the standard contribution limit for employees under age 50.
Take a look at the standard contribution limits over the past several years to get a better idea of how the numbers have moved over time:
| Year | 401(k) contribution limit (Under age 50) |
|---|---|
| 2025 | $23,500 |
| 2024 | $23,000 |
| 2023 | $22,500 |
| 2022 | $20,500 |
| 2021 | $19,500 |
| 2020 | $19,500 |
Just a few years ago, in 2020, the standard contribution limit was $19,500. Now, you’ll be able to sock away an additional $4,000 into your 401(k) in 2025.
The limits are higher for those over 49
If you’re approaching retirement and want to boost your retirement savings, catch-up contribution limits can make a big difference. In 2025, retirement savers aged 50 and over can still make a catch-up contribution of $7,500, bringing their total potential 401(k) contribution to $31,000. If you’re at least 50 or turning 50 next year, this is a great opportunity to increase your 401(k) contributions if you have extra money to set aside.
However, there’s a notable change in 2025 that could benefit some retirement savers. Under SECURE 2.0, employees aged 60, 61, 62, and 63 will see an even higher catch-up limit. For 2025, this boosted limit will be $11,250 instead of $7,500.
Should you contribute the max in your 401(k)?
It depends. According to Vanguard’s 2024 How America Saves report, only 14% of employees contributed the maximum amount to their 401(k) plans in 2023. While maxing out your 401(k) can be a win for some, it could be a costly mistake for others. Before you start funneling every spare dollar into your 401(k), take a moment to weigh the pros and cons to make sure it’s the best move for your financial game plan.
For example, if you’re aiming to reduce your taxable income and boost your retirement savings, contributing more to your 401(k) can be a smart strategy. Let’s say you earn $100,000 in 2025 and contribute $23,500 (the maximum amount for those under 50). Your taxable income, assuming no other deductions, would be reduced to $76,500. That means less money going to Uncle Sam and more staying in your pocket.
There are some downsides to consider, though. Many 401(k) plans come with limited investment options and management fees, which can eat into your returns over time. Also, accessing your 401(k) funds before age 59 1/2 can be tough without facing penalties. This could put you in a difficult spot if an emergency arises and you don’t have other accessible savings to tap into.
Although the 401(k) contribution limits are going up in 2025, it’s important to review your financial situation and the details of your 401(k) plan to decide how much you should contribute. If you have extra cash, putting it to work in a 401(k) could be a smart move and might even speed up your journey to a seven-figure retirement.
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