How To Max Out Your 401(k) Contributions Before 2025
Written by
Sarah Sharkey
Edited by
Amber Barkley
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A 401(k) is a tax-advantaged account designed to help you save for retirement. Many employers offer their employees access to a 401(k). Some employers even offer to match some of their employees’ contributions to the account. Maxing out your 401(k) allows you to supercharge your retirement savings journey.
Explore how to max out your 401(k) contributions by the end of the year.
401(k) Contribution Limits in 2024
Before exploring how to max out your contributions, it’s helpful to understand how much you can contribute.
In 2024, the 401(k) contribution limit is $23,000, which is up from $22,500 in 2023. Individuals aged 50 and over can contribute an additional $7,500 in catch-up contributions to their 401(k), bringing their total possible contribution to $30,500 in 2024.
How To Max Out Your 401(k) Contributions This Year
If you want to make the most of your 401(k) contribution options this year, follow these steps.
Review Your Contributions for the Year
Start by determining how much you’ve contributed toward your 401(k) up to this point in the calendar year. Depending on your situation, you may or may not need to make adjustments to max out your 401(k) contributions for the year.
Confirm Your Employer Match
Many employers offer matching contributions for your 401(k). Double-check that you are making the most of this opportunity.
For example, if your employer offers to match 5% of your salary in 401(k) contributions, confirm that you are contributing at least 5% of your paycheck to your 401(k).
Check Your Resources
If you haven’t reached your contribution limits for the year, take a look at your financial resources. Specifically, determine whether or not you have funds available in a savings account or investment account to accommodate a larger end-of-year contribution.
Talk to Your Employer
For savers with enough on hand to cover a lump sum contribution into a 401(k), maxing out your account might be possible this year. Reach out to your human resources department to determine how to bump up your contributions before the end of the year.
The details might vary based on your employer. But, generally, you’ll accomplish the task by increasing the percentage of your paycheck that is automatically sent to your 401(k). A representative from your human resources department should be able to help you through the paperwork for this change.
Benefits of Maxing Out Your 401(k)
If you aren’t sure that maxing out your 401(k) is worth the extra effort this year, reading through the benefits below might change your mind.
Matching Contributions
Many employers offer matching contributions to your 401(k), which can help you make the most of your retirement savings. Essentially, taking advantage of matching contributions amounts to getting free money for your retirement.
For example, say your employer offers a 5% match. If you make $100,000 and contribute $5,000 to your 401(k) in a year, your employer will provide a matching contribution of $5,000 to help you save for retirement.
Tax Advantages
“A 401(k) plan allows you to save money and lower your taxes,” said Paul Walker, author of “A Money Book Anyone Can Read.”
When you contribute to a traditional 401(k), those contributions lower your taxable income for the year. Although you’ll have to pay taxes on the withdrawals in retirement, making tax-deductible contributions can lower your tax bill for now.
Investing for the Future
As you contribute to a 401(k), you can invest the funds. Depending on investment performance, it’s possible your funds will grow significantly by the time you are ready to retire.
Build Your Retirement Savings
Maxing out your 401(k) allows you to build a solid nest egg for retirement. The more money you contribute to your 401(k), the more resources you can expect to lean on in retirement.
Although a 401(k) alone might not be enough to fund a comfortable retirement, building out this portion of your retirement savings plan is a good idea.
What To Do Before Maxing Out Your 401(k)
Although maxing out your 401(k) is an admirable financial goal, it’s not always the right move. Below are some reasons why maxing out your 401(k) might not be the way to go:
- You have debt. If you have high-interest debt, like credit card debt, it might make more sense to focus on paying off your debts first. Once you eliminate that high-interest debt from your life, you can start maxing out your 401(k).
- You don’t have an emergency fund. If you don’t have any money saved for an emergency, consider beefing up your accessible savings before throwing all of your funds into a 401(k), where they can only be accessed in specific circumstances.
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