What are the 401(k) contribution limits for 2025?

The amount you can contribute to your 401(k) in 2025 depends on your age and employment situation. Here's a breakdown of the contribution limits:

• For employees under 50: The maximum contribution is $23,5003.
• For employees age 50-59 and 64 and above: The maximum contribution is $31,000 ($23,500 base plus $7,500 catch-up).
• For employees age 60-63: The maximum contribution is $34,750 ($23,500 base plus $11,250 catch-up).

It's important to note that these limits apply to the combined total of traditional (pre-tax) and Roth 401(k) contributions. If you have access to both types of 401(k)s, you can split your contributions between them, but your total employee contributions cannot exceed the annual limit.

While much attention is focused on employee contribution limits, it's crucial to understand the changes affecting employer contributions as well. In 2025, the limit on total employer-plus-employee contributions to defined contribution plans increases to $70,000, up from $69,000 in 2024.

This increase provides an opportunity for employees to potentially save even more, especially if their employer offers matching or profit-sharing contributions. However, it's important to remember that total contributions cannot exceed your annual compensation at the company that holds your plan.

The increased contribution limits for 2025 offer several implications for retirement planning. Those implications include:

• Accelerated savings. The higher limits provide an opportunity to boost retirement savings, especially for those in their early 60s who can take advantage of the new supersize catch-up contributions.
• Tax considerations. For those using traditional 401(k)s, higher contribution limits mean potentially larger tax deductions in the current year.
• Roth opportunities. The increased limits also apply to Roth 401(k) contributions, allowing savers to put away more after-tax dollars that can grow tax-free.
• Employer matching. Check with your employer to see if they offer matching contributions on these higher limits, as this could significantly increase your overall retirement savings.

While these changes offer opportunities, it's important to remember that most employees are far from hitting the maximum contribution limits. According to Vanguard data, only 14% of employees maxed out their 401(k)s in 2023. However, the need for robust retirement savings is more pressing than ever, with the average American now believing they need $1.46 million to retire comfortably.

While 401(k) changes are grabbing headlines, there are other important retirement account adjustments to note for 2025:

• IRA contribution limits. The limit on annual contributions to an IRA will remain at $7,000 in 2025. The IRA catch-up contribution limit for individuals aged 50 and older also stays at $1,000.
• Roth IRA income limits. The income phase-out range for Roth IRA contributions increases. For single and head-of-household filers, the range is $150,000 to $165,000. For married couples filing jointly, it is $236,000 to $246,000.
• SIMPLE plans. The contribution limit for SIMPLE plans is $16,500 in 2025, up from $16,000 in 2024.
• Saver's Credit. The income limits for the Saver's Credit (also known as the Retirement Savings Contributions Credit) increase. For married couples filing jointly, the limit rises to $79,000, up from $76,500 in 2024.

With these new limits and changes in place, here are some strategies to consider for maximizing your retirement savings in 2025:

• Review your budget. Assess if you can increase your contributions to take advantage of the higher limits. Even small increases can make a significant difference over time.
• Take advantage of catch-up contributions. If you're 50 or older, don't overlook the opportunity to make catch-up contributions. This is especially important for those age 60-63 who can benefit from the new supersize catch-up limit.
• Consider a mix of traditional and Roth contributions. Depending on your tax situation and retirement goals, you might benefit from contributing to both traditional 401(k) and Roth accounts.
• Maximize employer matching. If your employer offers a match, try to contribute at least enough to get the full match. This is essentially free money for your retirement.
• Look beyond your 401(k). While 401(k)s offer significant benefits, also consider contributing to IRAs or other retirement accounts to diversify your savings and take advantage of different tax treatments.
• Consult a financial professional. Given the complexity of retirement planning and the various changes coming in 2025, it may be beneficial to work with a financial professional/contact who can help you optimize your retirement strategy.

The 2025 401(k) contribution limit changes present significant opportunities for retirement savers, particularly those aged 60-63 who can take advantage of the new supersize catch-up provisions. While these increased limits are valuable tools for retirement planning, success ultimately depends on consistent saving, strategic planning, and maximizing available benefits like employer matching. Whether you're just starting your retirement journey or nearing retirement age, understanding and utilizing these new limits can help strengthen your financial future.