To get the most benefit from your 401(k), you need to contribute the maximum amount. This amount will increase for 2025, allowing you to receive an even greater benefit from your retirement plan.
401(k) Limits Will Rise in 2025
The IRS reviews inflation data each year before deciding the contribution limits for 401(k)s. Given the hotter-than-average inflation last year, the IRS decided to increase contribution limits for these types of plans in 2025.
Contribution limits for 401(k)s are split into three parts. The first is the amount you can add as an employee, known as salary deferrals. Then, there is the total both you and your employer can contribute, which accounts for matching and other contributions. Finally, there is a catch-up contribution amount for those nearing retirement age. For certain savers, all three will increase next year.
For 2025, you can defer an additional $500 from your salary, bringing the total contribution limit to $23,500. Your employer can also contribute to your plan up to $70,000 – a $1,000 increase from the previous year.
A major change is also occurring with catch-up contributions. In the past, all people over the age of 50 could contribute a fixed amount. That amount will remain at $7,500 for the current year. The difference comes in the new limit for people aged 60, 61, 62, and 63 who can now add an additional $11,250 instead of the standard catch-up limit.
See the table below for a summary of changes to 401(k) contribution limits.
Past 401(k) Contribution Limit Increases
Contribution limits for 401(k) and similar plans are adjusted based on inflation, so it’s logical that they have increased steadily over time. The graph below summarizes the past changes in contribution limits.
There Is Still Time to Contribute for 2024
You can defer a part of your salary to your 401(k) until the end of the year, so there is still time to contribute for 2024. This year, you can contribute up to $23,000 and your employer can contribute up to a combined maximum of $69,000. If you are over age 50, you can also contribute an additional $7,500 as a catch-up contribution.
403(b) and Governmental 457 Plan Contribution Limits Will Also Rise in 2025
Several other types of retirement plans will also have higher contribution limits in 2025. 403(b), governmental 457, and the federal government’s Thrift Savings Plans share the same contribution limits as 401(k) plans. Therefore, all the information above also applies to these plans.
Follow These Steps to Grow Your 401(k) In 2025
To get the most from your retirement plan, you need to do more than contribute. You also need to consider investments, taxes, and the timing of your contributions. Follow these easy steps to ensure you don’t miss an important task that could set you up for retirement success.
1. Increase Your Contributions As Soon As Possible
Few plans automatically update contribution amounts to account for higher limits. Therefore, you may need to manually adjust the amount you contribute each paycheck.
Take the time now to review your plan and make any changes before your first pay period in January. By doing so, you give your investments the most time to work throughout the year.
2. Take Advantage of Employer Matching
Free money is hard to find, so don’t miss out when your employer offers it. Even if you aren’t able to contribute the maximum to your 401(k), contribute enough to earn your company’s full match.
Keep in mind that some employers only match during the months you contribute up to a prorated maximum. Therefore, you could miss out on matching if you front-load your 401(k) contributions in the first few months of the year. Your Human Resources department and plan document are excellent resources to determine if this situation applies to you.
3. Review Your Investments and Financial Plan with An Experienced Advisor
Contributing to your 401(k) is only a portion of the equation. You also need to choose wise investments and ensure your retirement savings strategy fits with your overall financial plan. A partnership with an experienced financial advisor is essential to this process.
The right financial advisor will help you analyze the investments available within your 401(k) plan and choose the ones that match your personal situation. They can also evaluate your full financial picture and help you make the tough choices that will set you on the path to retirement success.
Partner With Meld Financial and Get the Most from Your Retirement Plan
At Meld Financial, we can help you determine how much to save in your 401(k) and how to allocate your investments. We believe in a wholistic approach to retirement planning that considers your current and future goals and the investments that can help you achieve them.
Our unique approach to financial planning centers around our proprietary wealth management tool, Financial Fingerprint®. This comprehensive plan brings together the most important pieces of your financial puzzle into one easy-to-understand plan that grows with you.
To learn more about Financial Fingerprint® and get started today, contact a member of our team.
