2024 401k Contribution Limits and Catch-Up Rules

A 401(k) plan is an employer-sponsored retirement savings account that allows employees to invest a portion of their paycheck before taxes are taken out. These plans are a common way for individuals to save for retirement, offering tax advantages that can help savings grow over time. This article covers the specific contribution limits for 2025, including the rules for both standard and catch-up contributions.

2025 Employee Contribution Limits

For the 2025 tax year, the Internal Revenue Service (IRS) has set the maximum amount an employee can contribute to their 401(k) plan at $23,000. This limit, known as the elective deferral limit, applies to the total contributions you make from your salary, whether they are designated as pre-tax contributions or Roth contributions. This cap is per person, not per plan; if you contribute to multiple 401(k) plans, your total employee contributions across all of them cannot exceed this annual amount.

Individuals who are age 50 or over at any point during the calendar year are permitted to make additional “catch-up” contributions. For 2025, this additional amount is set at $7,500. This means an eligible individual can contribute a total of $30,500 to their 401(k) during the year.

Beginning in 2025, a new provision allows for even higher contributions for those closer to retirement. Individuals aged 60, 61, 62, and 63 can make a larger catch-up contribution of $11,250. For example, a 62-year-old employee can contribute the standard $23,000 plus the $11,250 higher catch-up, for a total of $34,250.

Overall 401k Contribution Limits

Beyond what an employee can contribute from their own salary, a separate, higher limit governs the total amount of contributions that can be made to a 401(k) account in a single year. This is often referred to as the “annual additions” limit. For 2025, this overall limit is $69,000. This figure represents the sum of all contributions made to your account from all sources.

This total includes your own elective deferrals, any employer matching contributions, and any other employer contributions, such as profit-sharing. Your catch-up contributions, if applicable, are added on top of this overall limit. For someone age 50 or over, the total limit would be $76,500. For those eligible for the higher catch-up, the total limit would be $80,250.

For example, if an employee under age 50 contributes the maximum of $23,000, and their employer provides a $10,000 match and a $5,000 profit-sharing contribution, the total annual addition is $38,000. This amount is well below the $69,000 overall limit for 2025.

Special Provisions for Catch-Up Contributions

A change introduced by the SECURE 2.0 Act affects how these contributions are treated for certain individuals. The law mandates that catch-up contributions made by high-income earners must be directed into a Roth account, meaning they are made on an after-tax basis. This rule applies to employees who earned more than $145,000 in wages from the employer sponsoring the plan in the preceding calendar year.

However, the implementation of this rule has been postponed. The IRS issued a notice which established an administrative transition period, delaying the enforcement of the Roth catch-up requirement until at least 2026. Consequently, for 2025, all eligible participants, regardless of their income level, can continue to make their catch-up contributions on a pre-tax basis if their plan allows.

Handling Excess Contributions

Accidentally contributing more than the legal limit to a 401(k) can happen, especially when changing jobs or contributing to multiple plans. If you find you have made excess elective deferrals, you should notify your plan administrator of the excess amount before the tax-filing deadline for the year in which the over-contribution occurred, which is usually April 15 of the following year.

When an excess contribution is corrected in a timely manner, the excess amount, along with any earnings it generated, will be distributed back to you from the plan. The returned excess contribution is taxable as income in the year it was contributed. The earnings on that excess amount are taxable as income in the year they are distributed to you.

Failing to correct an excess contribution before the deadline results in tax consequences. The excess amount is subject to double taxation; it is taxed in the year it was contributed and then taxed again when it is eventually distributed from the plan during retirement. This penalty makes it important to monitor your contributions and address any overages within the allowed timeframe.