The 401(k) contribution limit for employees in 2025 has increased to $23,500, up from $23,000 in 2024. The employer contribution limit also rises to $46,500, bringing the combined employee and employer 401(k) contribution limit to $70,000 for 2025.
Don’t underestimate the power of employer 401(k) contributions, especially as you advance in your career. As you gain seniority, you might find that employer profit-sharing or matching contributions become more significant. In strong years, some companies increase their profit-sharing contributions to reward employees. The year I left Credit Suisse, for instance, I received a $22,000 match/profit-sharing contribution on top of my maximum 401(k) contribution.
For employees ages 50 and older, the catch-up contribution limit remains at $7,500, unchanged from 2024. However, starting in 2025, employees aged 60 to 63 will benefit from an increased catch-up contribution limit of $11,250, rather than the standard $7,500, providing additional support for those approaching retirement.
Contributing to your tax-advantaged retirement accounts is just one leg of the new three-legged retirement stool. The other two legs are building up taxable retirement accounts and cultivating your “X factor“—a unique source of potential income or value outside of traditional investments.
With pensions now rare for most employees and Social Security projected to be underfunded by 25%, it’s smart to view Social Security as a bonus rather than a guarantee.
Your Goal: Max Out Your 401(k) Every Year
If there’s one essential move every employee should make, it’s to strive to max out their 401(k) contributions each year. Since contributions are made with pre-tax income, maxing out your 401(k) is more manageable than it may seem. Plus, by making it automatic from each paycheck, you’ll quickly adapt to living within your means.
After just 10 years of consistent contributions, you’ll likely be surprised by your balance. Beyond your own contributions, you’re