OVERVIEW
- 401k contribution limit for 2025: The combined contribution limit for 2025 is $70,000 (or $77,500 if you’re age 50 or older by December 31, 2025). This includes both employee and employer contributions.
- Employee contribution limit: You can contribute up to $23,500 of your income for 2025. If you’re age 50 or older, you may contribute an additional $7,500 in catch-up contributions, for a total of $31,000.
- 401k contribution deadline: Employee contributions must be made by December 31, 2025. Employer contributions are generally due by the employer’s tax filing deadline, which may extend into 2026 if a valid tax extension is filed.
A 401k is one of the most widely used ways to save for retirement. Many employees contribute through payroll deductions, and some self-employed individuals use a Solo 401k to do the same. These plans come with tax benefits that can help your money grow over time.
But there’s a limit to how much you’re allowed to put in each year. The IRS sets annual contribution limits that apply to both employees and employers, and those limits are adjusted to account for inflation.
If you’re planning your retirement strategy for 2025, this guide explains how much you may be able to contribute, what the deadlines are, and how different types of contributions work together.
📌 Also Read: 401k Age Requirements & Other Eligibility Rules
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Why Is There a Limit on 401k Contributions?
401k contributions are tax-advantaged. When you contribute to a traditional 401k, the money is typically deducted from your taxable income. You won’t pay taxes on those contributions until you withdraw the funds, usually starting at age 59½, which is the age you can start taking qualified distributions from your plan.
Because this structure delays taxation, the IRS sets annual limits on how much you’re allowed to contribute. These limits are in place to prevent high earners from deferring unlimited amounts of income and avoiding taxes indefinitely. The goal is to create a fair system while still encouraging long-term saving.
401k Contribution Limits for 2025
The IRS adjusts 401k contribution limits each year to keep pace with inflation. For 2025, the maximum combined contribution limit across employee and employer contributions has increased slightly from the prior year.
📌 2024 recap: In 2024, the total limit was $69,000, or $76,500 for those age 50 or older. The employee contribution cap was $23,000, with a $7,500 catch-up allowance.
📌 2025 update: For the 2025 plan year, the total 401k contribution limit is $70,000. If you’re age 50 or older by December 31, 2025, your limit increases to $77,500 with catch-up contributions.
Here’s how those numbers break down:
- Employee contributions: You may contribute up to $23,500 of your income in 2025. This applies to traditional 401k, Roth 401k, or a combination of both.
- Catch-up contributions: If you are age 50 or older by year-end, you may contribute an additional $7,500, raising your total employee contribution limit to $31,000.
- Employer contributions: Contributions from your employer—such as a match or profit-sharing—count toward the overall $70,000 limit. If you contribute the full $23,500 yourself, there is $46,500 of potential room remaining for employer contributions.
- Average employer match: Most employers contribute between 3 percent and 6 percent of your eligible compensation. While this helps, it usually doesn’t fill the entire remaining space.
After-Tax Contributions and the Mega Backdoor Roth
If your plan allows it, you may be able to make after-tax contributions once you’ve reached the employee deferral limit. These contributions are not tax-deductible but may grow tax-free if properly converted.
Some plans give you the option to move those after-tax dollars into a Roth IRA through what’s known as a Mega Backdoor Roth. This strategy may allow high earners to contribute beyond the standard limits, but it requires a plan that supports both after-tax contributions and in-service rollovers.
📌 Also Read: 50 Notable Companies That Provide The Mega Backdoor Roth IRA
Employer Contribution Limits
Employers can contribute to your 401k in two main ways: through matching contributions or nonelective contributions. Both count toward the total 401k contribution limit, which includes what you contribute as an employee.
If you have a side hustle with no full-time employees, you could be eligible for a Solo 401k. This type of plan allows you to contribute both as the employee and the employer. It’s also possible to contribute to both a company 401k and a Solo 401k, as long as the contributions are based on income from different sources.
Employer Match
With a matching contribution, your employer adds money to your 401k based on what you contribute. This is typically structured in one of two ways:
✅ Dollar-for-dollar match: The employer matches 100 percent of what you contribute, up to a set percentage of your salary.
✅ Partial match: The employer contributes a percentage of your contribution. A common formula is 50 percent of the first 6 percent of your pay.
✏️ Hypothetical Example: If you earn $80,000 per year and your company offers a 50 percent match on up to 6 percent of your pay, the most they would contribute is $2,400. That’s 50 percent of your $4,800 contribution (which is 6 percent of $80,000).
Most companies match between 3 percent and 6 percent of your eligible compensation. While some large companies may offer more generous match programs, it’s rare for employer contributions to come close to filling the entire remaining space up to the $70,000 combined limit.
Nonelective Contributions
Some employers make nonelective contributions regardless of whether you contribute anything yourself. These are automatic contributions to your 401k, typically set as a flat dollar amount or percentage of your salary.
✏️ Hypothetical Example: A company might contribute $500 per year to your account, even if you haven’t made any deferrals. In some cases, this is paired with a standard match formula.
Nonelective contributions are less common and usually make up a smaller share of total employer contributions. But they can still add meaningful dollars to your retirement savings over time.
Traditional 401k vs Roth 401k
A 401k plan has two different types of accounts within the plan: A Traditional 401k and a Roth 401k.
Not every company offers a Roth option. But if they do, it can drastically increase your tax savings (and account balance) in retirement.
Traditional 401k
With a Traditional 401k, your contributions are made with pre-tax dollars. This means the money is deducted from your taxable income for the year.
✏️ Hypothetical Example: If your salary is $100,000 and you contribute $10,000 to your traditional 401k, only $90,000 is counted as taxable income for that year.
Because you’re deferring taxes today, your withdrawals in retirement will be taxed as ordinary income. The amount you owe depends on your income and tax bracket at the time you withdraw.
Roth 401k
A Roth 401k works differently. Contributions are made with after-tax dollars, so they do not reduce your taxable income today. But once you’re eligible to withdraw, qualified distributions are tax-free, including both your contributions and any earnings.
This type of account works similarly to a Roth IRA, but with a few key differences:
✅ Roth 401ks have no income limits, so high earners may still contribute.
✅ Contribution limits are the same as traditional 401k limits, which are typically much higher than those for Roth IRAs.
Contribution Limits Apply to Both Accounts
The IRS sets one employee contribution limit that applies across both account types. In other words, if you split contributions between a traditional 401k and a Roth 401k, the total cannot exceed the limit for your age group.
For 2025:
✅ If you’re under age 50, the combined limit is $23,500
✅ If you’re age 50 or older, the combined limit is $31,000 (which includes the $7,500 catch-up contribution)
Your employer may allow you to choose how your contributions are allocated between the two accounts. Just keep in mind that Roth contributions are only available if your plan offers the Roth option.
When Can You Withdraw From a 401k?
You may begin taking qualified distributions from your 401k once you reach age 59½. Any withdrawals made before that age are typically considered early distributions and may incur a 10 percent penalty, along with income tax on the amount withdrawn.
Here’s how withdrawals are taxed:
✅ Traditional 401k: You’ll pay income taxes on the full withdrawal amount, since contributions were pre-tax.
✅ Roth 401k: Qualified withdrawals are tax-free, since contributions were made with after-tax dollars.
📝 Note: Tax rules can change, and each situation is different. If you’re not sure which account type is right for you, consider speaking with a qualified financial or tax professional.
What If I Contribute Over the Limit?
Mistakenly contributing more than the allowed amount to your 401k can lead to tax consequences if not corrected in time. The IRS considers any excess contribution an excess deferral, and it needs to be removed by a specific deadline to avoid double taxation.
The deadline to correct an over-contribution is April 15 of the following year, which is the federal tax-filing deadline.
If you think you’ve gone over the limit, notify your HR or plan administrator as soon as possible. They’ll need to withdraw the excess amount and return it to you. The distribution will be treated as taxable income, and in some cases, you may also owe tax on any earnings associated with that excess contribution.
✏️ Hypothetical Example: If you contributed $25,000 in 2025 but the limit was $23,500, the excess $1,500 would need to be withdrawn. That amount would be included in your taxable income for the year and may require a corrected W-2 from your employer.
If you don’t fix the error by the deadline, you may face double taxation—once when the contribution was made (since it reduced your taxable income) and again when you withdraw the funds in retirement.
When Is the 401k Contribution Deadline?
The deadline for making 401k contributions depends on whether the contribution is from the employee or the employer.
✅ Employee contributions: These must be made by December 31 of the plan year. For the 2025 tax year, the employee contribution deadline is December 31, 2025.
✅ Employer contributions: These are due by the employer’s federal tax-filing deadline, which is typically April 15 of the following year. If the business files a tax extension, the deadline is extended to October 15.
📝 Note: Employer contributions for the 2025 plan year can potentially be made as late as October 15, 2026, if a valid tax extension is filed. Always check with your plan administrator or accountant to confirm which deadlines apply to your specific situation.
Wrapping It Up
Maximizing your 401k contributions is one of the most effective ways to prepare for retirement. Understanding how the 2025 limits work, along with the deadlines and rules around different contribution types, can help you avoid common mistakes and take full advantage of available tax benefits.
Your ideal strategy will depend on your income, employer plan, age, and retirement goals. Whether you prioritize pre-tax savings today or tax-free withdrawals tomorrow, knowing the rules puts you in a better position to succeed.
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