401(k) Limits Skyrocket to $34,750 in 2025—Because Your Employer’s Match Definitely Won’t

Brace for impact: The IRS just greenlit a jaw-dropping $34,750 max contribution for 401(k)s next year—that’s nearly double what most mortals stash away annually.

Who benefits? Mostly high-earners playing catch-up (read: your boss). Meanwhile, the average worker’s 4% match now covers roughly three weeks of avocado toast.

Pro tip: If you’re maxing this out, you’re either a crypto whale diversifying or proof that late-stage capitalism has a sense of humor.

Maximize 401(k) Catch-Up Contributions And Tax Savings In 2025

New Age-Based Catch-Up Limits

The maximum annual 401(k) contribution that people can make in 2025 stands at $23,500. Workers between 50-59 have the opportunity to maximize their 401(k) catch-up contributions with a total of $31,000 that combines the basic $23,500 with a supplemental $7,500 allowance. Workers who fall between the ages of 60 and 63 can make extra catch-up contributions totaling $11,250 which enables them to accumulate approximately $34,750 by the end of the year. The catch-up amount administered to workers above age 64 resets to its original value of $7,500.

To benefit from the maximum 401(k) catch-up contributions in 2025 you must have reached the listed age by December 31, 2025. Those who reach age 60 during December of a specific year can leverage the maximum contribution threshold throughout the entire 12-month period.

Implementation and Participation

Right now, according to some Fidelity data, around 97% of retirement plans have already added this new 401(k) catch-up contributions feature for 2025. The remaining 3% of plans will still cap catch-up contributions at the standard $7,500 limit.

Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, stated:

Despite these advantages, only about 15% of eligible employees utilized catch-up contributions in 2023 according to Vanguard’s “How America Saves” report. This relatively low participation rate is expected to continue even with the enhanced 401(k) catch-up contributions 2025 limits.

Tax Benefits for Higher Earners

The enhanced 401(k) catch-up contributions 2025 limits are particularly beneficial for higher-income earners who are looking for additional tax deductions at this time.

Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts, had this to say:

Pretax contributions to these plans reduce your current taxable income, although withdrawals will face taxation later as regular income when you actually retire and start taking distributions.

Retirement Savings Concerns

A Northwestern Mutual survey that was conducted in January revealed Americans expect to need around $1.26 million for a comfortable retirement, and more than half of them are worried about outliving their savings. The 401(k) catch-up contributions 2025 enhancement helps address this concern for older workers.

For ambitious savers who have already maxed out their standard and catch-up contributions, after-tax deferrals provide another option, even though only about 22% of employer plans offer this particular feature.

The opportunity to make higher 401(k) catch-up contributions in 2025 represents a significant “super funding” option for those workers in the 60-63 age bracket, helping them bolster their retirement security in the final years before they stop working.