If you’re saving for retirement in a workplace plan, pay attention.
Signing up for your workplace 401(k) plan is one of the best things you can do for your retirement.
The neat thing about 401(k)s is that they’re funded automatically through payroll deductions. This means that once you sign up, your employer is the one responsible for getting money into your account — not you. You may be more likely to keep up with your savings goals if you opt into a 401(k), as opposed to choosing to open and fund an IRA on your own.
If you’re someone who participates in a 401(k) plan, you should know that the rules are changing for the better in 2025. Here’s an important update to be aware of.
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401(k) contributions are going up
Maxing out a 401(k) is no easy feat. But if you’re a higher earner or a savvy budgeter, it may be something you’re used to doing.
The good news is that 401(k) contributions are rising in 2025. If you’re under 50, the maximum contribution you can make next year is $23,500, up from $23,000 in 2024.
Now the general catch-up contribution for 401(k)s is staying the same at $7,500 in 2025. So for many savers aged 50 and over, the maximum 401(k) contribution in the new year will be $31,000. But some older workers will be able to contribute even more thanks to a new super catch-up option.
If you’re between the ages of 60 and 63 in 2025, you’re eligible for a catch-up 401(k) contribution of $11,250. That’s not on top of the $7,500 catch-up just mentioned — it’s instead of it. But all told, if you’re 60 to 63, you can contribute a total of $34,750 to your 401(k) next year, which is helpful to do if you feel your balance isn’t where you want it to be.
To be clear, though, the ability to take advantage of 401(k) catch-up contributions doesn’t hinge on your plan balance. The only thing that matters is your age. So whether your 401(k) balance currently sits at $50,000 or $2 million, you can make what catch-up contribution you’re eligible for based on your age in 2025 — either $7,500 or $11,250.
And remember, traditional 401(k) contributions shield a portion of your income from taxes. So it’s worth making catch-up contributions even if your savings are already in a great place.
Make sure you’re set up for success
The more money you’re able to put into your 401(k) next year and going forward, the more retirement wealth you stand to build — and the larger a tax break you might enjoy. Take a look at your current 401(k) contribution and see if it’s possible to increase it in 2025.
If you’re getting a raise, one thing you may want to do is send that extra money into your 401(k) directly. If you do so from your very first paycheck of 2025, you’ll be less likely to miss that extra money. But you might enjoy the benefit of larger contributions for many years to come.
