Maximize Your 401(k) Savings: IRS Contribution Limits

Maximize Your 401(k) Savings: 2025 and 2026 IRS Contribution Limits

12/10/2025

RetirementInvestments

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Saving in a 401(k) plan is one of the smartest ways to help prepare for retirement. It could be a powerful tool to build your future wealth, especially if your employer offers matching contributions, essentially free money toward your retirement.However, there are limits established by the Internal Revenue Service (IRS) to how much you may contribute annually to a 401(k). Find out what the new 2026 401(k) contribution limits are by age and contribution type. Also, learn not only how to avoid over-contributing, but also how to use contribution limits to help maximize retirement savings. This information is not tax or investment advice. You should consult with a tax advisor and/or a qualified investment professional for advice specific to your particular circumstances.

Key Takeaways

401(k) contributions have individual and annual contribution limits that are adjusted annually. For all contributors, the 2025 individual limit was $23,500 and was raised to $24,500 for 2026. For those over 50, the catch-up contribution limit is $8,000 in 2026.
If you contribute beyond these limits, you should fix this before April 15^th to avoid major tax implications.
It’s important to check your contributions regularly, for example when you earn a pay raise or change jobs.

401(k) Plans and Contribution Limits

Let’s clarify a few 401(k) basics to start. A 401(k) plan is a retirement savings plan sponsored by your employer. It allows you to save and invest a portion of your paycheck before taxes are taken out. Taxes aren't paid until the money is withdrawn from the account, helping to make it a powerful tool for tax-deferred growth. Taxes on withdrawals depend on your income in that year. A Roth 401(k) works in a similar manner, except taxes are withheld when you make the contributions, and withdrawals on contributions and earnings are tax-free in retirement. Keep in mind that if you withdraw funds prior to age 59 ½, you also pay a 10% early withdrawal penalty on your 401(k) distribution, unless an exception applies. When you decide to start putting money away for retirement, you need to keep the contribution limits set by the IRS in mind. These limits include an individual contribution limit and an overall contribution limit.Both limits are adjusted each year based on cost-of-living and applied to traditional 401(k)s and Roth 401(k)s. In addition to adjusting these limits, the IRS may also adjust the catch-up contribution limit for participants over 50.

Individual 401(k) Contribution Limits

The individual contribution limit applies to the amount you may personally divert from your paycheck into your 401(k) account each year.¹If you have a multiple 401(k) accounts, the limits apply collectively. Say you are under 50 and have a Roth 401(k) and a traditional 401(k). In 2026, you cannot contribute more than $24,500 in total to these two accounts unless your plan allows (see discussion further down).²

Type of Contribution	2025 Limit	2026 Limit
Individual Contribution	$23,500	$24,500
Catch-up Contribution (for individuals over 50)	$7,500	$8,000
Catch-up Contribution (for workers aged 60-63)	$11,250	$11,250

The idea behind these limits is to keep the tax benefits fair between lower and higher compensated employees. Starting in 2026, as part of the Secure 2.0 Act, catch-up contributions will change for individuals over 50 earning over $145,000. They will be required to contribute their catch-up amounts as after-tax dollars that must go into a Roth 401(k). If the employer does not offer a Roth 401(k) option, the employee will not be able to make the catch-up contribution.³

Employer 401(k) Contribution Limits

In addition to your individual contribution limit, there are also total annual limits on 401(k) contributions that apply to the combined total of contributions from you and your employer. Many companies offer a 401(k) match as part of your compensation package, so make sure you take advantage of this money if it’s offered—you’ve earned it! These types of programs may motivate you to save at a higher rate than you anticipated. You may thank them later if you find that your retirement savings is ahead of your peers. A company’s contributions don’t count toward your individual contribution limit. However, there are annual limits on how much you and your employer may collectively contribute to your 401(k) account. The IRS enforces the following in total dollar contributions per account:⁴

$70,000 for 2025
$72,000 for 2026

If you make less than these amounts, you and your employer cannot collectively contribute more than 100% of your total salary.Let’s translate these numbers into an example. Say you were 34 in 2026 and earned a pre-tax salary of $150,000. Since you were under 50, the IRS won’t allow you and your employer to collectively contribute more than $72,000 to your 401(k).

You contribute $23,000 to your 401(k)
Your employer has a 6% match. This means they match the first 6% you put into your 401(k), or $9,000.
This results in $32,000 in your 401(k) account in 2026
This is well below the annual contribution limit.

But what if you could afford to put more money into your 401(k)? That’s where after-tax contributions come into play.

The After-Tax 401(k) Contribution Exception

For the most part, individual contributions are limited in the ways discussed in this article. However, as in life, there are exceptions. Some employer plans do allow employees to contribute after-tax money to their 401(k) accounts beyond the limits.⁵ How does that work? Let’s hop back to our example where $32,000 has been contributed to your account. If your plan allows after-tax contributions, you could put up to $40,000 of after-tax money into your 401(k) before you hit the annual limit of $72,000 for 2026.Not all plans allow for after-tax contributions, so be sure to check with your benefit specialist to see if this is an option for you.

Strategies for Maximizing Your 401(k) Contributions

So, how do you make the most of these limits and help set yourself up for a comfortable retirement? Let’s review some strategies.

Start Saving Early: Start contributing to your 401(k) as early as possible to maximize the benefits of compounding, as it allows your savings to earn returns over time and be reinvested to generate more earnings. Starting to make contributions early in your career may help you build a larger retirement fund.
Increase Payroll Deferrals: Gradually increase your payroll deferrals over time to enhance savings. When you receive a raise, consider allocating part of your raise to your 401(k). You’re already accustomed to the cash flow at the lower salary. And the money invested in retirement could help you significantly in the future.
Take Advantage of Employer Match: Make sure to contribute enough to qualify for your employer’s match program, which is essentially free money toward your retirement! Employer matches often come with conditions, such as requiring you to contribute a certain percentage of your salary to receive the full match. Be sure to understand the conditions to receive the full match and avoid leaving money on the table.

Common 401(k) Contribution Questions

We know there are a lot of rules out there about 401(k)s and keeping up with all of them is tough. Let’s answer a few of the most common ones here.

If I Have More Than One 401(k), How Do the Limits Affect Me?

It’s rare to be contributing to two 401(k)s at the exact same time. Regardless, the individual and annual limits apply to the combined total contributions to all 401(k) accounts, traditional and Roth, that you contribute to in a year. This issue could occur if you changed jobs mid-year and have a 401(k) with your previous employer and your new employer. If you contributed to your 401(k) at your previous company, be mindful when setting up contributions at your new company to avoid going over the total IRS contribution limit. It may also make sense to roll your old 401(k) over to your new company’s plan. Chat with a financial advisor about the investment options for each plan to figure out which portfolio fits with your retirement goals and your risk tolerance.

Will My 401(k) Contributions Automatically Stop When I Hit the Limit?

Depending on the company you work for, your plan may automatically stop your contributions when you hit the limit. They may have measures in place to prevent you from setting your contribution amount too high or stop more money from going into your 401(k) once you’ve contributed the maximum.However, not all companies have these policies in place, so you may have to watch your account and ensure that you aren’t adding too much money. Be sure to ask your benefits manager about your company’s safeguards when setting up your 401(k).To help prevent going over the contribution limits, keep the following in mind:

Check the contribution limits each year
Reassess your contribution amount whenever you get a salary adjustment.
If you change employers, check how much you contributed to your previous 401(k) and factor that into your new contribution amount

If you accidentally overcontribute to your 401(k), you want to act as soon as possible to avoid paying penalties.

What Happens if You Exceed the 401(k) Contribution Limit?

Let’s say you get a big raise in April, but you don’t change your 401(k) contribution. The year ends and you get an update from your retirement plan, and you realize you contributed $37,000 to your 401(k) in 2025. This situation is fixable. Here are the steps in the process⁶:

Contact your plan administrator as soon as possible. They should be able to help you resolve the situation by requesting a “corrective distribution” from your plan.
Ensure you receive an amended W-2. This corrective distribution would need to be added to your taxable income for the previous year.
Pay taxes on interest earned due to the extra contributions. Include this interest on your 1099-R Form.

It’s important to fix the issue before the day taxes are due for the impacted year (usually April 15^th). Here’s another example.⁷If you over-contributed to your 401(k) in 2025 and request a corrective distribution before April 15, 2026, the money that is refunded to you is only considered part of your 2025 taxable income. However, if you make the correction after April 15, 2026, the distribution is now considered part of your taxable income for 2025 and 2026. If you’re younger than 59 ½, you’d also pay a 10% early distribution penalty. Keep in mind that the paperwork may take some time to process, so if you notice that you’ve put aside too much money, try to correct the situation as soon as possible.

Final Thoughts

If saving in a 401(k) is a key part of your retirement planning, then learning the rules of that 401(k) comes with the territory. As your contributions grow, knowing how to navigate the limits could save you some headaches (and money) along the way.Of course, any retirement planning and preparation involves important money decisions, so be sure to do your research before making major adjustments. If you have questions about contributing to your 401(k), reach out to your plan administrator or a professional retirement adviser to learn more about your specific situation. Maxed out your 401(k) contributions or need a bit more liquidity with your savings? Consider a Jenius Bank high-yield savings account and put your savings to work today.

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