If you’re looking to save more for retirement, consider adjusting your 401(k) plan contributions for 2025 now, as suggested by financial experts. The maximum amount you can defer into 401(k) plans in 2025 has increased to $23,500, compared to $23,000 in 2024. Those aged 50 and over can still contribute an additional $7,500 as a catch-up.
For a specific group of savers, there’s an even greater opportunity with 401(k) catch-up contributions, which Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, describes as “super funding.”
Under the Secure 2.0 Act, the catch-up contribution limit for employees aged 60 to 63 will rise to $11,250 in 2025, making the total possible 401(k) deferral for these investors $34,750.
“Not many are aware of this extra increase,” notes Catherine Valega, a Boston-based CFP and founder of Green Bee Advisory. It’s expected that it will take time for the general public to learn about this new advantage. Nonetheless, increasing contributions later on could still be beneficial for those within this age group, say the experts.
### Increase 401(k) Deferrals for 2025 Now
If adjusting your 401(k) deferrals for 2025 is on your agenda, “now is the time to be doing it,” advises Valega. Usually, a few pay periods are needed for changes in 401(k) contributions to take effect, and delaying might mean missing out on higher contributions in January.
Should you miss making larger deposits initially, you can still aim to max out your plan by increasing deferrals later in the year. However, doing so might affect your cash flow more than you’d prefer, Valega warns.
Lucas has already updated next year’s 401(k) contributions for his clients as early as December. “It’s all set for next year,” he shares. “We’re on pace, starting with the first payroll.”
That said, not everyone can afford to fully max out their 401(k) plan each year. In 2023, about 14% of employees reached the maximum contribution limits, according to Vanguard’s 2024 How America Saves report, which analyzed data from 1,500 qualified plans and nearly five million participants.
