Early January May Be the Perfect Time to Boost Your 401(k) Plan Contributions
If you’re looking to focus on retirement in 2025, the beginning of the year may be an ideal time to increase your 401(k) plan contributions, according to financial experts. Starting in 2025, the 401(k) plan contribution limit will increase to $23,500 for most investors, up from $23,000 in 2024. Those 50 and older can also make additional catch-up contributions of up to $7,500, bringing the total limit to $31,000.
Financial advisor Catherine Valega suggests being aggressive with your investments, especially if you have decades until retirement. She recommends maxing out 401(k) plans if possible, citing that “be aggressive with your investments, especially if you have decades until retirement.”
The Secure 2.0 change also brings a new catch-up limit for investors age 60 to 63, allowing them to contribute an additional $11,250 towards their 401(k) plans, bringing the total deferral limit to $34,750 for 2025. Ultimately, experts advise deferring as much as you feel comfortable, keeping in mind the potential 10% penalty and taxes for early withdrawals, with some exceptions.
It’s also crucial to maintain a “sufficient emergency fund” outside of your retirement savings, with experts recommending a minimum of three to six months of expenses, depending on your family’s circumstances.
