How to Change Your 401k Contributions
Gain a clear understanding of the process for changing your 401k contribution, from key financial considerations to confirming the update is complete.
A 401k contribution is the portion of your salary you direct into a workplace retirement savings plan, which is automatically deferred from your paycheck. A key feature of the plan is its flexibility, as you are not locked into your initial contribution rate. You can adjust the percentage or dollar amount you save, allowing you to modify your savings strategy as your financial circumstances and goals evolve.
Key Factors for Your New Contribution Rate
Your employer’s matching policy is a major factor when choosing a new contribution rate. Many employers match contributions up to a certain percentage of salary. For instance, an employer might offer a dollar-for-dollar match up to 3% of your pay and fifty cents on the dollar for the next 2%, meaning you would need to contribute 5% to receive the full benefit. Not contributing enough to get the full match is like turning down free money.
The Internal Revenue Service (IRS) sets annual limits on how much you can contribute. For 2025, the maximum employee salary deferral is $23,500, and this limit applies to the total of your pre-tax and Roth contributions. This figure is subject to cost-of-living adjustments. The total amount that can be contributed to your account, including both your deferrals and any employer contributions, is capped at $70,000 for 2025.
Employees aged 50 and over can make additional “catch-up” contributions. For 2025, this amount is $7,500, allowing an eligible employee to contribute a total of $31,000. A provision effective in 2025 also allows those aged 60, 61, 62, or 63 to make a higher catch-up contribution of $11,250, if their plan has adopted this feature. These provisions can accelerate savings in the years before retirement.
Many 401k plans offer a choice between traditional pre-tax and Roth contributions, and your selection has direct tax implications. Traditional contributions are deducted from your paycheck before income taxes are calculated, lowering your current taxable income. Roth contributions are made with after-tax dollars, meaning there is no upfront tax deduction, but qualified withdrawals in retirement are tax-free. Your choice depends on whether you expect to be in a higher tax bracket now or in retirement.
The Process for Modifying Your Contributions
To submit the change, you first need to identify your 401k plan administrator, which is the financial institution managing the plan, such as Fidelity or Vanguard. This information is available on your account statements. Your company’s human resources department can also provide the administrator’s contact information or direct you to the correct online portal.
Most modern 401k plans allow changes to be made through an online portal. You will need to log into your account on the plan administrator’s website. Once logged in, navigate to a section often labeled “Contributions” or “Manage Contributions.” Here, you can enter your new contribution percentage or dollar amount, specify the contribution type, and then review and confirm your election.
Some plans may require you to complete a physical form, often called a “Salary Deferral Agreement,” which can be obtained from your HR department. After filling out the form with your new contribution details and signing it, you will submit it back to HR for processing.
Timing and Confirmation of Your Change
After you submit your contribution change request, the adjustment is not instantaneous. The change must be processed by your employer’s payroll system and the 401k plan administrator. The new contribution rate will take effect within one to two pay cycles following your request. The exact timing depends on your employer’s payroll schedule, so it is advisable to contact HR for precise information.
Verifying that the change has been correctly implemented is an important final step. Review your first pay stub after the expected effective date to see the new 401k deduction amount reflected. You should also log into your 401k account portal to confirm that your contribution election has been updated to the new percentage or amount you selected.
Most 401k plans allow you to change your contribution rate at any time, enabling you to respond to life events like a raise. However, some plans may impose restrictions, limiting changes to specific windows, such as once per quarter. Consult your Summary Plan Description (SPD) or contact your plan administrator to understand the rules governing the frequency of changes for your plan.