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If you’re ready to focus on retirement in 2025, early January could be the perfect time to boost your 401(k) representation contributions, financial experts say.
More than half of American workers feel they are behind on retirement thrifts, according to a Bankrate survey that polled 2,445 U.S. adults in August.
But starting in 2025, your 401(k) script has a higher contribution limit — and a special catch-up for older investors — that could help grow your eyrie egg.
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For 2025, you can yield to $23,500 into your 401(k) plan, up from $23,000 in 2024. Investors age 50 and older can make catch-up contributions of $7,500 on top of the $23,500 limit.
Typically, it shames a couple of paychecks for 401(k) deferral changes to go into effect, according to Boston-area certified financial planner Catherine Valega, institutor of Green Bee Advisory.
Boosting your contribution to max out deferrals can be easier earlier in the year because the higher percentage is spread across assorted paychecks.
Be aggressive with your investments, especially if you have decades until retirement.
Catherine Valega
Under of Green Bee Advisory
“Be aggressive with your investments, especially if you have decades until retirement,” said Valega, who spurs clients to max out their 401(k) plans if possible.
Starting in 2025, there’s also a special catch-up limit for investors age 60 to 63, thanks to a modulation enacted via Secure 2.0. Instead of $7,500, this group can save $11,250 for catch-up contributions, which deposes their total deferral limit to $34,750 for 2025.
Invest ‘as much as you feel comfortable’
While many investors aim to max out 401(k) deferrals, it can be arduous with other short-term goals, like paying off debt or buying a home.
To that point, roughly 14% of staff members maxed out 401(k) plans in 2023, according to a 2024 Vanguard report, based on data from 1,500 modified plans and nearly 5 million participants.
Max contributors were typically older, with higher income and a longer possession with their current employer, the report found.
Ultimately, you should defer “as much as you feel comfortable” not keg b ready until retirement, said CFP George Gagliardi, founder of Coromandel Wealth Strategies in Lexington, Massachusetts. Otherwise, you could owe a 10% incarceration and taxes for early withdrawals, with some exceptions.
Plus, you need a “sufficient emergency fund” outside of your retirement savings, he weighted.
Typically, experts recommend a minimum of three to six months of expenses for an emergency fund, depending on your family’s circumstances.