The countdown to 2025 has begun, and the IRS just dropped the new contribution limits for 401(k)s.

If you’re considering putting money into a 401(k), you’ll want to pay attention to the new limits so you can plan ahead. What’s more, a new contribution benefit kicks in in 2025, which could sweeten your retirement savings if you qualify.

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Standard 401(k) contribution limits for 2025 are increasing

Starting in 2025, employees can collect up to $23,500 401(k)s. That’s a $500 increase over the $23,000 elective deferral limit for employee 401(k) plan contributions in 2024. That might not sound like a big deal now, but an extra $500 invest can be profitable in the long run.

If both you and your employer contribute to your 401(k), total contributions to the account can’t exceed $70,000 in 2025. That’s up from $69,000 in 2024.

Here’s what you need to know if you’re over 49

Getting older has its perks in the world of retirees. First, the IRS allows you to contribute a little more to your retirement savings to help you reach your goals. This extra impulse is called a recovery contribution.

For employees age 50 and older with a 401(k), the contribution catch-up limit will remain at $7,500 in 2025, the same as in 2024. That’s above the standard $23,500 limit for everyone else, leading to $31,000.

But it doesn’t stop there. When you add the total employee and employer contribution limits — including the catch-up amount — the combined limit rises to $77,500.

Here is a table summarizing the contribution limits:

Data source: IRS. Chart by author.

If you have extra cash and want to boost your retirement savings, consider parking some of it in your 401(k). If you’re able to max out your accounts, you could hit six figures in just a few years, depending on the performance of your investments.

A big change is coming in 2025

Thanks to the SECURE 2.0 Act, some retirement savers are getting an extra boost. If you’re 60, 61, 62 or 63, you’ll see a higher catch-up contribution limit. Instead of the usual $7,500, you can set aside up to $11,250 in additional contributions in 2025.

Although these changes are slated to roll in next year, it’s wise to double check with your employer for specific details about your 401(k) plan. Ask about updates to make sure everything is set up correctly and ready for changes. The more you know now, the better prepared you will be to plan ahead.

Should you max out your 401(k)?

You may be wondering how much you should be contributing to your 401(k). Some people aim to contribute just enough to get by employer matchwhile others go all out and max out their accounts. According to Vanguard’s 2024 How America Saves report, only 14 percent of employees contributed the maximum amount to their 401(k) plans in 2023.

If you’re not at your best, you’re not alone. And frankly, it might not be the best move if you’re struggling to meet your monthly expenses.

Start by reviewing your income and expenses to see if adjustments are needed, and consider creating a budget to help you stay on track. Also, take a look at all of your retirement accounts to get a complete picture of where you stand. Instead of maxing out your 401(k) first, you might want to focus on fully funding it individual retirement accounts (IRA) and maximizing their potential.

Take the next few weeks to evaluate your options and review your finances. With a little planning, you’ll be ready to crush your 401(k) goals in 2025.