Your 401(k) is one of the most powerful tools for building wealth —but only if you know how to use it effectively. Contribution limits, tax treatment, and rollover rules can get confusing, and you’re not alone if you’ve found them hard to follow. In this post, we will focus on the contribution side so you can take full advantage of saving through your 401(k).
**Grab a pen and jot down all that applies to you as you read through this post
Understand Your Contribution Limits:
The maximum amount you can contribute to your 401(k) in 2025 is between $70,000 and $81,250. This is based on your age and includes your contribution, employer match, and any after-tax dollars.
- Under age 50: Max contribution is $70,000
- Age 50 – 59: Max contribution is $77,500
- Age 60-63: Max contribution is $81,250
- Age 64 and up: Max contribution is $77,500
Even as a financial advisor, I sometimes have to double-check these numbers- so if you find them confusing, you’re not alone, especially when it comes to what “TYPE” of contribution makes up the maximum allowed amount. We will cover that below. Taking some time to understand exactly how much you can contribute should be the first step in your planning.
My Employee Contribution:
In 2025, you can contribute up to $23,500 from your paychecks. These contributions can be made pre-tax (traditional 401(k)) or after-tax (Roth 401(k)). Keep in mind that you can choose between traditional and Roth contributions each time you contribute or a combination of both- but the combined total cannot exceed $23,500 for the year.
Don’t Leave Free Money Behind:
Employer matching contributions are arguably the best benefit of a workplace 401(k). One of the biggest mistakes people make is not contributing enough to receive their full employer match.
For example, if your employer matches 100% of the first 3% of your salary, and you make $100,000, that’s an extra $ 3,000 added to your account each year —just for contributing $ 3,000 yourself. That’s FREE MONEY your company is offering- Take It!
Throughout your career, employer contributions — compounded by market growth — can grow into hundreds of thousands of dollars. Be sure you know your company’s match policy and contribute at least enough to receive every available dollar.
Use Catch-Up Contributions:
Catch-up contributions are especially useful if you started saving late or are off track to hit your retirement savings goals. Cath-ups are also based on age.
If you are between 50 and 59 years old, you can contribute an additional $ 7,500 in 2025.
Thanks to the Secure Act 2.0, if you are between the ages of 60 and 63, you can use the “Super Catch-Up” amount of $11,250. At age 64, it reverts back to $ 7,500 per year.
Note: Catch-up contributions may or may not be matched by your employer. This varies from plan to plan- so be sure to ask!
After-Tax Contributions To Maximize Your Savings:
Once you reach your employee limit and catch-up limit, you might think you’re done. But if your plan allows after-tax contributions, there is more room to save. After-tax contributions are made with after-tax dollars. You won’t get a tax deduction now, but the money grows tax-deferred- meaning you won’t pay taxes on the gains until you withdraw it. Think of it like a traditional IRA funded with after-tax dollars.
The smart move? Convert those after-tax contributions to your Roth 401(k) account as soon as possible.
Why do this? Because once converted, that money and all future growth become completely tax-free—a huge win if done correctly. Withdrawals will be tax-free as long as you follow the Roth rules about withdrawals. This is known as the mega back-door Roth and is possibly the best way to supercharge your retirement savings.
Don’t Get Confused If You Own The Company:
This is where many clients often get confused. If your 401(k) is from “your company,” you are allowed to make both an employee contribution and also match it with an employer contribution. The same rules on limits apply but don’t slight yourself by not realizing you are both the owner and an employee of your business.
Never Leave An Old 401(k) Behind:
When you retire or change jobs, you’ll have options for moving your 401(k) funds, including rolling them over to an IRA or new employer’s plan. Proper planning can help you avoid unnecessary taxes and keep your money growing.
Too often, I see people with multiple old 401(k) accounts from previous jobs – these accounts can easily get overlooked. There is zero benefit to leaving an old 401(k) account in your previous employer’s plan. Consolidating them into one account will also make managing your investments easier and more efficient.
Quick Example:
53-year-old employee earning $150,000 per year (*this is just hypothetical)
- Employee contribution $23,500
- Catch-up contribution $7,500
- Employer match: $4,500
- After-tax contribution: $42,000
This is an example of how an employee can maximize their 401(k) contribution with a total of $77,500 flowing into that account for 2025.
Bottom Line:
Whether you’re just getting started or are aiming to hit the full contribution limit, there may be more opportunities to save inside your plan than you initially realize. Take some time to fully understand your maximum contribution limit and the types of contributions that make up the limit.
The bottom line? Don’t let your 401(k) nap on the job- contribute as much as you can, put it to work early, and let compound growth do the heavy lifting for your future.
*Blog post is strictly for educational purposes. Consult your financial advisor, cpa, and hr department before deciding on how to fund your 401(k)