The 401(k) is the most powerful retirement savings tool available to most Americans — especially when an employer match is involved. In 2025, the limits increased again, giving you more room to shelter money from taxes.
2025 401(k) Limits
- •Employee contribution limit: $23,500 (up from $23,000 in 2024)
- •Catch-up contribution (age 50+): additional $7,500 → total $31,000
- •Super catch-up (age 60–63, new in 2025): additional $11,250 → total $34,750
- •Total combined limit (employee + employer): $70,000
- •SIMPLE 401(k) limit: $16,500
Employer Match: Never Leave This Money
- •Most common match: 50% of contributions up to 6% of salary — meaning you need to contribute 6% to get the full match
- •On a $75,000 salary with 6% match: that's $4,500 in free money per year
- •Over 30 years at 7% growth: that $4,500/year employer match alone becomes ~$454,000
- •Always contribute at least enough to capture the full employer match — it's an instant 50–100% return
Traditional vs Roth 401(k)
- •Traditional: Pre-tax contributions reduce taxable income now; withdrawals taxed in retirement
- •Roth: After-tax contributions now; tax-free withdrawals in retirement (no RMDs)
- •Rule of thumb: Choose Roth if you expect to be in a higher tax bracket in retirement; Traditional if you expect lower
- •Many plans allow splitting between both — a useful hedge against future tax uncertainty
To max out in 2025: divide $23,500 by 26 pay periods = $904/paycheck. If that's too much, work up to it incrementally — even increasing by 1% per year makes a massive difference over a career.