Can I Increase My 401k Contribution at Any Time?

A 401(k) plan is a retirement savings account sponsored by an employer, allowing employees to contribute a portion of their pre-tax or Roth income directly from their paycheck. These plans offer a tax-advantaged way to save for retirement, with investments growing over time. Generally, you can adjust your 401(k) contributions at various times throughout the year.

Understanding Contribution Limits

Annual contribution limits set by the Internal Revenue Service (IRS) apply to 401(k) plans. For 2025, the maximum amount an employee can contribute, known as the elective deferral limit, is $23,500. This limit applies to all 401(k) plans an individual participates in, even if through multiple employers.

For those aged 50 and over, the IRS permits an additional “catch-up” contribution of $7,500 in 2025, allowing a total contribution of $31,000. Under the SECURE 2.0 Act, individuals aged 60 to 63 may be eligible for an enhanced catch-up contribution of $11,250 in 2025, if their plan allows.

Steps to Adjust Your Contributions

To increase your 401(k) contributions, interact with your employer’s human resources department or the plan administrator. Many plans offer an online portal as the primary method for making these adjustments. Accessing this online platform requires logging in with your credentials.

Once logged into the retirement plan’s website, navigate to the section for contribution settings or deferral elections. You can specify your new contribution amount, often as a percentage of your salary or a fixed dollar amount per pay period. After submitting your changes, they take effect within one or two pay periods, depending on your employer’s payroll cycle. Confirm with your HR department or plan administrator if you are unsure about the specific steps or the effective date of your changes.

Key Considerations Before Increasing

Before increasing your 401(k) contributions, evaluate your overall financial health. Ensure you have an adequate emergency fund, typically three to six months of living expenses, readily accessible in a liquid account. Prioritizing the payoff of high-interest debt, such as credit card balances, can also be more beneficial than increasing retirement savings.

Consider how a higher 401(k) contribution will impact your take-home pay and your ability to meet other short-term and long-term financial goals. It is important to understand your employer’s matching contribution policy. You should aim to contribute at least enough to receive the full employer match, as this is essentially free money that boosts your retirement savings. Once you maximize the employer match, assess if further increasing your contributions aligns with your broader financial strategy.