End of Year Retirement Account Contributions

This year is wrapping up quickly! I can’t believe it’s already the end of October. This is the time of year to consider if you’ve added as much money as you are able to to your employer sponsored retirement account (such as a 401(k), 403(b), 457(b), etc). Usually your contributions, known as salary deferrals, must be in the account no later than December 31 to count for current year contributions. This is different from IRA contribution deadlines which are typically tax filing day. We’ll cover that in another article. For now, here’s some information to refresh your memory about the maximum annual limits so that you can determine if you have the cash flow to add more for 2025. I’ve also included anticipated 2026 numbers so that you can start to think ahead.

 

There are a few “maximum contributions” definitions when it comes to funding your retirement account(s). The IRS has its limits as does your employer sponsored plan. The limits established by your employer may be different from the IRS limits; it’s not uncommon for employer-defined limits to be less than IRS limits. Rarely, if ever, would your employer offer limits greater than IRS limits. In fact I’ve never seen this, but you should always check YOUR employers plan to be sure. And when in doubt, reach out to your HR department for clarification!

 

The IRS defines two annual contribution limits for 401(k), 403(b), SIMPLE IRA

 

  1. Employee contributions (often called salary deferrals). These are contributions you make as an employee that are in lieu of salary.

 

AND

 

  1. Maximum Annual Contribution: This applies to the total of:
    1. Elective deferrals (excluding catch-up contributions)
    2. The amount your employer contributes
 
IRS Maximum Limits
20252026 (anticipated)
401(k)
Employee:
The amount an employee can contribute is typically limited to the lesser of 100% of compensation or this dollar amount shown. See example below.		$23,500$24,500
Age 50+ catch-up cont:$7,500$8,000
Age 60, 61, 62, 63 catch-up limits: This is NOT in addition to the 50+ catch-up amount$11,250$11,500
Max Annual Contribution:
This amount includes employer + employee contributions EXCEPT for catch-up contributions.		$70,000$72,000
Max Including Catch-Up Contributions  
Employee Cont + Age 50+ Cont$77,500$80,000
Employee Cont + Age 60-63 Cont$81,250$83,500
 *403(b) and 457(b) plans have additional catch-up contributions

Let’s take a look at some examples:

Maximum Employee Contribution: If you earn $20,000 in annual salary the most you could contribute would be $20,000 (i.e; 100% of your salary). In your case, 100% of your salary ($20,000) is less than the max annual contribution of $23,500 so you must go with the lesser of these two numbers to determine your annual max.

 

Let’s take a look at an employee who is age 51 and makes $50,000 a year. The following example shows just how much the employee can add to their account. It does not illustrate how much their employer can add to their account for the year.



Employee Contribution

$23,500

$23,500 is less than 100% of their annual salary of $50,000, therefore the lesser value will always be the maximum contribution limit.

Age 50+ Catch-Up Contribution

$7,500

   

Total Employee Contribution for 2025

$31,000

   

 

The total max contribution for 2025 (employee + employee contributions) is $70,000. This number includes their regular contribution of $23,500 (the catch-up contribution of $7,500 is not factored in) + the employer’s contribution. Therefore the total amount of money that the employer could contribute would look like this:



Total Maximum Account Contribution for 2025

$70,000

  

– the Employee Contribution

$23,500

  

Max amount employer could contribute    

(see plan details)

$46,500

  
    

The employer will more often not contribute this full amount so please read your plan thoroughly to understand the exact limitations of your plan.



I encourage all of my clients to use this time of year to review their accomplishments for the year, reflect on what they’d like to continue doing or change, and then begin to prepare for the year ahead!

Catch-Up Contributions

 

Feeling late to FI? If the answer to that question is yes, and it’s because you waited longer than some to start investing, there are a few foundational habits you can lean into now to maximize your journey to financial independence. The one we focus on today is consistent contributions to your investment accounts, especially any retirement accounts you have available to you.

 

While time in the market is always more important than timing the market, when you’re setting off on this journey later than some, you may not have as much time in the market as you’d prefer. Please don’t let that deter you, though –  it’s helpful to lean into the areas of personal finance that can hopefully afford you the most growth over the time you have left until your determined FI date.

 

Assuming the rest of your foundation is solidly in place (minimal, if any, debt outside of your mortgage, an in-tuned understanding of monthly and annual cash flow, and the mindset to support these habits), leaning into contributing to your investments can be a great way to build wealth. 

 

Here’s some great news for those feeling late to FI: once you reach the age of 50 you are eligible to contribute even more to your retirement accounts whether it’s an IRA or a workplace retirement. Here’s a quick breakdown of the numbers for 2025. If you’re contributing to a workplace retirement account, be sure to check with your employer to see if there are any special provisions or restrictions.

IRS Contribution Limits for Retirement Accounts in 2025

Source: https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000

 

Investment Vehicle

Regular Contribution 2025

Catch-Up Contribution

Total Contribution for 2025

Age at which you’re eligible for a catch-up contribution

IRA

(Traditional and Roth)

$7,000

$1,000

$8,000

Age 50 

*catch-up contribution will be indexed for inflation beginning in 2026

Workplace Retirement Accounts

Employee Elective Deferral Max – 2025

Catch-Up Contribution

Total Employee Elective Deferral Contribution for 2025

Age at which you’re eligible for a catch-up contribution

401k, 403(b), 457, TSP

$23,500

$7,500

$31,000

Age 50

$23,500

$11,250

$34,750

Age 60, 61, 62, 63

The special catch-up contribution of $11,250 is ONLY for those ages 60-63. Once you’re 64 your catch-up contribution max goes back to $7,500

 

A few notes about catch-up contributions:

 

  1. For workplace retirement accounts, catch-up contributions only apply to employee elective deferrals, not employer contributions.

  2. Because of #1, SEP IRAs are not eligible for catch-up contributions since it’s only the employer, not the employee, that makes contributions to this type of account.

  3. 457 plans MAY have a special catch-up contribution that applies to your last 3 years of work prior to retirement, based on retirement age as outlined in the summary plan description through your employer. See your employer for details.

 

Mid-year is the perfect time to check in on your retirement account contributions for 2025. While you generally have until tax-filing deadline the following year to make a current year contribution, it’s always a good idea to take the pulse of your contributions to-date for 2025 about this time of year.

 

And if you’re contributing to an employer sponsored retirement plan, don’t forget to check in on how much your employer has contributed this year!


If your cash flow supports it, and you determine you’re not reaching your investment contribution goal yet for this year, now’s a great time to increase it! Taking control of the controllable helps you start to reduce the BS that gets in your way of achieving FI when you feel you’re a little behind. So keep checking in with yourself about what you can most control an lean into those actions.