Once you retire, you’ll likely need to draw on a variety of financial sources — and one of the most important ones may be your 401(k). And for 2025, you can put even more money into your plan than ever.
You can invest in your 401(k) in one of two ways, depending on your employer’s plan. With a traditional 401(k), you contribute pre-tax dollars, which can lower your taxable income, and your money can grow tax deferred. If you have a Roth 401(k) option, you can contribute after-tax dollars, which aren’t deductible, but your eventual withdrawals will be taxfree if you’ve had your account at least five years and you’re at least 59½. For either a traditional or Roth 401(k), as well as similar plans such as a 457(b) (for government employees) or a 403(b) (for educators and employees of some nonprofit groups), the contribution limit has increased by $500 for 2025, to $23,500. If you’re 50 or older, you can contribute an additional $7,500, for a total of $31,000. And under the SECURE 2.0 legislation, if you are between 60 and 63, you have a higher catch-up contribution — $11,250, instead of $7,500, for a total of $34,750.
If you can afford to contribute the full amount to your 401(k) or similar plan, consider doing so. Of course, not everyone is in that position. If you’re a younger worker, you may well have other financial obligations, such as paying off student loans. And even if you’ve been in the workforce for a while, you may be putting away money for other things — such as your children’s education — as well as your own retirement. But even if you can’t “max out” on your 401(k), try to contribute at least enough to earn your employer’s matching contribution, if one is offered.
