In 2025, you can increase your contributions to your 401(k) and learn more about it.

In 2025, you can save more for retirement by putting more of your pre-tax dollars.

The Internal Revenue Service declared the new 401(k) contribution limits for 2025 on Friday. For 2025, individuals can contribute up to $23,500 to employer-sponsored retirement accounts, including 401(k)s, 403(b)s, most 457 plans, and federal Thrift Savings Plans. This is a $500 increase from the previous year's limit.

Individuals aged 50 and above can contribute an additional $7,500 in catch-up contributions in 2025, which is the same amount as last year, for a maximum total of $31,000.

Starting in 2022, individuals aged 60 to 63 can increase their retirement contributions by up to $11,250, bringing their maximum contribution to $34,750, thanks to a provision of the Secure 2.0 Act.

In 2025, savers can contribute up to $7,000 to an individual retirement account, with an additional $1,000 for those aged 50 and older, the same limits as in 2024. This applies to both traditional and Roth IRAs.

If you earn a certain income and your spouse can contribute to an employer-sponsored account, some or all of your traditional IRA contributions may be tax-deductible.

Don't leave money on table

Saving for retirement through maxing out your 401(k) is a smart move, but it may not be the best option for everyone. Here are some tips to help you optimize your retirement savings based on your individual circumstances.

1. Start early

It's crucial to begin saving as much as possible as early as possible, as more time in the market enables your investments to grow and benefit from compound interest. Although you may have the potential to save more in the future, you cannot regain lost time.

If you contribute the maximum of $23,500 a year to your 401(k) and earn an 8% annual rate of return, your balance will exceed $6 million in 40 years.

Assuming an 8% rate of return, if you contribute $10,000 a year for 40 years, you will have approximately $2.6 million in retirement.

2. Take advantage of an employer match

Experts often refer to employer 401(k) matching contributions as "free money" since no additional effort is required to earn them.

If you contribute 4% of your salary to your 401(k) and your employer matches the contribution, you will have earned a 100% return on your investment.

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