401(k) plans, both Traditional and Roth, are popular defined contribution plans that allow employees and employers to contribute towards retirement savings. The Internal Revenue Service (IRS) sets annual limits on these contributions, adjusting them periodically for inflation. Here’s a comprehensive overview of the contribution limits for 2025:
Employee Contribution Limits
| Age Group | Annual Limit |
|---|---|
| Under 50 | $23,500 |
| 50 and over | $31,000 |
Employees aged 50 and over can make an additional $7,500 in catch-up contributions, bringing their total allowable contribution to $31,000.
Special Catch-Up Provision for Ages 60-63
Starting in 2025, there’s a new “super catch-up” provision for those aged 60-63. These individuals can contribute up to $34,750 annually ($23,500 base + $11,250 catch-up).
Employer Contributions
Employers can make additional contributions to their employees’ 401(k) accounts through matching or non-elective contributions.
Total Annual Contribution Limit
The maximum combined employee and employer contributions for 2025 are as follows:
| Age Group | Annual Limit |
|---|---|
| Under 50 | $70,000 |
| 50 and over | $77,500 |
| Ages 60-63 | $81,250 |
These limits represent the total amount that can be contributed to an employee’s account from all sources (employee contributions, employer matching, and any additional employer contributions).
Key Points to Remember
- Contribution Types: Employees can make pre-tax contributions to Traditional 401(k)s or after-tax contributions to Roth 401(k)s, up to the annual limit.
- Catch-Up Contributions: The catch-up provision allows those 50 and older to save more as they near retirement.
- Employer Matching: Employer contributions don’t count towards an employee’s individual contribution limit but do count towards the total annual contribution limit.
- Multiple 401(k) Accounts: If you have multiple 401(k) accounts, your total contributions to all accounts cannot exceed the annual limit.
- Highly Compensated Employees: Some highly compensated employees may face additional restrictions on their contributions due to non-discrimination testing.
Remember, these limits are subject to change annually. It’s always wise to consult with a financial advisor or your plan administrator to ensure you’re maximizing your retirement savings within the current IRS guidelines.
