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Roth 401(k) Contribution Limits for 2025

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Saving for retirement is a top financial priority for many. If you’re one of those who has prioritized retirement by opening a Roth 401(k), it’s crucial to use the account optimally to build tax-free retirement income. The IRS has raised the annual contribution limit for Roth 401(k)s to $23,500 for 2025. Here are more details on the contribution limit and how you can take advantage of this unique retirement account. You can also work with a financial advisor who can advise you about your best retirement choices.

What Is the Roth 401(k) Contribution Limit for 2025?

A Roth 401(k) is an employer-sponsored retirement account that uses post-tax dollars. Unlike a traditional 401(k), to which you would contribute pre-tax dollars, a Roth 401(k) allows you to pay taxes first and make tax-free withdrawals in retirement.

The IRS limits the amount you can deposit to this tax-advantaged account. See below the limits for 2025 and a comparison from 2024:

Roth 401(k) Contribution Limits: 2024 vs. 2025

Type of Contribution2024 Limit2025 Limit
Roth 401(k) Contributions$23,000$23,500
Catch-Up Contributions (over age 50)$7,500$7,500
Catch-Up Contributions (Aged 60-63)$11,250$11,250

The IRS has increased the contribution limit by $500 from 2024. As a result, you can adjust your monthly contribution to maximize your Roth 401(k) to the new limit. Additionally, if you’re 50 or older, remember that you can take advantage of additional catch-up contributions of up to $7,500.

So, workers aged 50 and up can contribute a maximum of $31,000 to their Roth 401(k) in 2025. Remember, the contribution limit counts toward Roth and traditional 401(k) plans. Therefore, your contributions to both plan types must add up to $23,500 or less. This rule is helpful to keep in mind if you want to contribute to both types.

Should You Max Out Your Roth 401(k) Contributions?

Saving for retirement is vital for your financial plan and contributing to your Roth 401(k) is an excellent idea to help you get there. However, maxing out your contributions might strain your finances and achieving financial health means balancing priorities. For example, it’s essential to knock out debt and save for other goals, such as a down payment for a house. Therefore, contributing the full $23,500 might not be optimal.

Instead, it’s recommended to contribute enough to take advantage of matching funds, if possible. You don’t want to leave free money on the table, so allocating enough money each month to receive the full match from your employer can provide exponential growth to your retirement account. In addition, other retirement vehicles can offer more flexibility and profitability.

Employer-sponsored retirement plans can restrict your investment choices, while individual retirement accounts (IRAs) allow you to invest in funds that fit your preferences. If you have enough income, it might be best to contribute enough to your 401(k) to receive matching funds and deposit another chunk of cash into an IRA.

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Tax and Investment Benefits of a Roth 401(k)

roth 401k limits

With a traditional 401(k), you defer taxes on your investments until retirement. This style offers the benefit of delaying taxation until later in life when your tax bracket might be lower. On the other hand, a Roth 401(k) uses money after the IRS taxes it.

In other words, a Roth 401(k) has you pay taxes now so you don’t have to worry about them later. Plus, the IRS doesn’t tax earnings in a Roth 401(k). You can then withdraw from your Roth 401(k) during retirement without increasing your income taxes. However, if you withdraw funds before age 59.5 or before owning the account for five years, you’ll pay a 10% penalty.

Unlike a Roth IRA, a Roth 401(k) has a higher contribution limit and no income limitations. Specifically, the 2024 contribution limit for Roth IRAs is $7,000 and $8,000 if you’re 50 or older. Unlike a Roth IRA, a Roth 401(k) has a higher contribution limit and no income limitations.

Plus, individual tax filers with a modified adjusted gross income (MAGI) of $165,000 ($161,000 in 2024) or more and married filers with a MAGI of $250,000 ($240,000 in 2024) or more are not eligible to contribute to a Roth IRA in 2025. Roth 401(k)s don’t have an income limitation and the contribution limit is $23,500 instead of $7,000. Therefore, Roth 401(k)s don’t exclude investors based on income and they allow you to invest more.

Roth 401(k) Contribution Limits for Employer Matching and Highly Compensated Employees (HCEs)

Highly compensated employees (HCEs) must abide by income-based regulations when contributing to their Roth 401(k). Highly compensated employees are those who own more than 5% of the company, officers making over $230,000 or owners earning more than $160,000 from the company.

In some cases, HCEs are also among the top 20% highest paid in the company. If you’re an HCE, the non-HCEs in your company will influence how much you can contribute to your Roth 401(k). Namely, your contributions cannot be more than 2% higher than the average Roth 401(k) contributions by non-HCEs in the company.

Consider Other Retirement Accounts

Because laws regarding income and employee contributions can limit HCEs from building up their Roth 401(k)s, it’s a good idea to consider other options. For instance, you might have a low enough MAGI to contribute to an IRA. Individual Retirement Accounts (IRAs) come in two main types: Traditional and Roth. A Traditional IRA allows tax-deferred growth, meaning contributions may be tax-deductible and taxes are paid upon withdrawal.

A Roth IRA, on the other hand, is funded with after-tax dollars, allowing tax-free withdrawals in retirement. Another option is a Health Savings Account (HSA), which offers tax advantages and can be used for medical expenses in retirement.

For those who are self-employed or own a small business, options like a SEP IRA, SIMPLE IRA or Solo 401(k) can provide significant tax benefits and higher contribution limits. Additionally, annuities offer a way to generate guaranteed income in retirement, though they come with fees and restrictions. Diversifying retirement savings across multiple accounts can provide flexibility, tax advantages and financial security as retirement approaches.

Bottom Line

roth 401k limits

The IRS has increased the Roth 401(k) contribution limit to $23,500 for 2025, up from $23,000 in 2024. Contributing to this account can garner matching funds from your employer and create tax-free income during retirement. Plus, you can pair this account with other investments to diversify your portfolio and sidestep issues if you’re an HCE. Overall, if you have a Roth 401(k), it’s wise to take advantage of this unique account, as not everyone’s employer offers it.

Tips for Contributing to Your Roth 401(k)

  • It can be challenging to discern exactly how much you should contribute to your Roth 401(k). Competing financial priorities and opportunities can stress your decision-making but a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • A 401(k) is just one option for retirement savings. An individual retirement account, or IRA, functions like a 401(k) but it isn’t attached to your employer. Plus, you can choose any stocks, bonds and indexes you want without restriction, giving you freedom as an investor.

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