What's Happening
15 minutes ago

Auto Parts Maker Magna Q4 Earnings: Beats Expectations, Slashes 2026 Sales Target Again Amid EV Uncertainty, Market Shifts

benzingabenzinga.com
15 minutes ago

Is Amazon an Excellent AI Stock to Buy at Current Prices?

foolfool.com
15 minutes ago

3 Reasons Arm Holdings Is a Must-Buy for Long-Term Investors

foolfool.com
16 minutes ago

TSLA Stock Has Plunged Over 25% From Its December Peak, And This Analyst Says It Has Not 'Bottomed' Yet: 'One More Move Down, Which Could Happen Over ...

benzingabenzinga.com
21 minutes ago

TRADEPULSE POWER INFLOW ALERT: DEERE & COMPANY (DE) MOVES UP OVER 3% AFTER ALERT FROM TRADEPULSE

benzingabenzinga.com
30 minutes ago

Is It Finally Time to Buy This Incredibly Cheap Semiconductor Stock?

foolfool.com
30 minutes ago

3 Artificial Intelligence (AI) Stocks I'm Buying and 1 I'm Avoiding in February

foolfool.com
35 minutes ago

XRP Is Up 400% in the Past 3 Months. Is It a Buy Now?

foolfool.com
39 minutes ago

12 Consumer Discretionary Stocks Moving In Friday's Pre-Market Session

benzingabenzinga.com
39 minutes ago

12 Health Care Stocks Moving In Friday's Pre-Market Session

benzingabenzinga.com
39 minutes ago

12 Industrials Stocks Moving In Friday's Pre-Market Session

benzingabenzinga.com
40 minutes ago

12 Information Technology Stocks Moving In Friday's Pre-Market Session

benzingabenzinga.com
44 minutes ago

What 16 Analyst Ratings Have To Say About Coinbase Glb

benzingabenzinga.com
44 minutes ago

Demystifying Global Payments: Insights From 7 Analyst Reviews

benzingabenzinga.com
45 minutes ago

DaVita Plunges Over 10% In Friday Pre-Market After Warren Buffett Cuts Stake In One Of Berkshire Hathaway's Longest-Held Investments

benzingabenzinga.com
45 minutes ago

Breaking Down Evolus: 4 Analysts Share Their Views

benzingabenzinga.com
45 minutes ago

Twilio Stock: A Deep Dive Into Analyst Perspectives (21 Ratings)

benzingabenzinga.com
45 minutes ago

2 Nasdaq Stocks That Are No-Brainer Buys Now

foolfool.com
45 minutes ago

Could IonQ Stock Help You Retire a Millionaire?

foolfool.com
50 minutes ago

Where Will Palantir Stock Be in 3 Years?

foolfool.com

The 401(k) Contribution Limits for 2025 Are Bigger Than Ever

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.

Shocked person staring at computer.

Image source: Getty Images.

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.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

Related Posts

Social Security is an essential piece to most American’s retirement plans. Without their monthly benefits, some 16.3 million seniors U.S, would be living below the

The average retirement age in the U.S. was 62 in 2023, but that number’s been slowly ticking up over time. Rising life expectancies and rising

While the stock market is still thriving, some investors may be feeling wary about the future. Spiking inflation could cause the Federal Reserve to shift

There are plenty of ways to become a millionaire, like starting a successful business, being a professional athlete, or becoming a movie star. For most