Hey, everyone! Are you maximizing your 401K donations every year? This is a great way to save on retirement. Retirement may seem far away, but it will arrive without you knowing it. Seriously, maximizing 401k is the easiest way to become a millionaire. It's automatic and you won't even miss it in a few months.
The maximum 401K contribution limit is usually increased every few years, but 2025 is special. Congress has added a new category for workers aged 60 to 63. This is a breakdown of the restrictions for 2025.
- Under 50: $23,500
- 50-59 years old: $23,500 (standard extension) + $7,500 (catch) = $31,000
- 60-63 years old: $23,500 (standard extension) + $11,250 (enhanced catch-up) = $34,750
- Ages 64 and above: $23,500 (standard extension) + $7,500 (catch) = $31,000
Wow, this is a lot of money to throw away. Your contribution to the traditional 401K will not be taxed. This is a huge benefit. Who doesn't want to pay less taxes? This is good news for older workers. However, there is another major change in 2026.
Rose 401k
Many employers now offer Roth 401K options to their employees. If this option is provided, you can contribute to the traditional 401K (before tax) and/or Roth 401K (after tax). If you choose Roth 401K, you will pay taxes immediately, but no tax will be imposed during the withdrawal period. Both are good choices. You should have a traditional and Roth retirement account to increase your tax diversity. Both can help you reduce taxes in the long run.
Chasing the contribution changes in 2026
If your income exceeds $145,000 in 2025, there will be another major change next year. All catch-up donations must be in Ross 401k. I guess the government prefers taxes now rather than later. I don't think it's a big deal. Regardless, it is best to improve your tax diversity. Most older workers save much more in traditional retirement accounts than Roth. This is because in the past we have contributed a lot to our Roth account.
My retirement fund has about 75% tradition and 25% Rose. I think it's a good combination.
This is a major change next year.
- If your income exceeds $145,000
However, there is a big trap. Employers do not need to offer the Rose 401K option. If your employer does not offer the Roth 401K option, you will not be able to make the final contribution. This applies only if your income exceeds $145,000. If you fall into this category, check your 401K plan now.
Retirement savings
My best advice for young workers is to maximize the contribution of 401k as soon as possible. Contribute 10% of your income each year and increase your income. Once you start making a maximum 401k donation every year, your retirement savings will accumulate quickly, and more complex interests will serve you.
Have you improved your contribution of 401k? The traditional 401k and Ross 401k are both good choices. Continue to invest!
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