401k Contribution Deadline Approaching

The end of the year is approaching, and if you haven’t maximized your 401(k) contributions, time is running out. Unlike IRA contributions that can be made until tax filing day, 401(k) contributions must be made through payroll deduction by December 31st of the calendar year.

2025 401(k) Contribution Limits

The IRS has set the following contribution limits for 2025:

Standard Employee Contribution Limit: $23,500 (up from $23,000 in 2024)

Catch-Up Contribution (Age 50+): An additional $7,500, bringing the total to $31,000

New Super Catch-Up (Ages 60-63): Starting in 2025, those aged 60-63 can contribute an extra $11,250 in catch-up contributions, for a total of $34,750

Total Contribution Limit (Employee + Employer): $70,000 for 2025

Understanding the December 31 Deadline

The 401(k) contribution deadline is absolute and cannot be extended. Here’s what you need to know:

Payroll Timing: Your contribution must be deducted from your paycheck and deposited into your 401(k) account by December 31. This means if your last paycheck of the year is December 27, that’s effectively your deadline.

Processing Time: Contact your HR department immediately to understand payroll deadlines. Many companies require contribution changes to be submitted 1-2 pay periods in advance.

No Extensions: Unlike IRA contributions, you cannot make 401(k) contributions after year-end, even if you haven’t reached the limit.

Catch-Up Contribution Rules

If you turn 50 or older during the calendar year, you qualify for catch-up contributions for the entire year. The additional $7,500 catch-up amount can make a significant difference in your retirement savings.

For someone in the 24% tax bracket, maxing out catch-up contributions saves an additional $1,800 in federal taxes while building retirement wealth.

The new SECURE 2.0 provisions introduce enhanced catch-up opportunities:

• Ages 50-59: Standard $7,500 catch-up
• Ages 60-63: Enhanced $11,250 catch-up
• Age 64+: Returns to standard $7,500 catch-up

Strategies for Maximizing Year-End Contributions

If you’re behind on contributions, consider these strategies:

Calculate Your Gap: Review your year-to-date 401(k) contributions and determine how much you need to contribute to reach the limit.

Increase Your Contribution Percentage: If you’re paid semi-monthly and have two paychecks remaining, you may need to temporarily increase your contribution rate significantly.

Use Bonuses: Many employers allow you to direct year-end bonuses entirely to your 401(k). Check if your plan allows for bonus contributions.

Consider Cash Flow: If increasing contributions will strain your budget, prioritize at least getting the full employer match before maximizing contributions.

Employer Matching Considerations

Before focusing on maxing out contributions, ensure you’re capturing your full employer match:

Match Formulas: Common formulas include 50% match on the first 6% of salary, or dollar-for-dollar match on the first 3%. Know your plan’s specifics.

True-Up Provisions: Some plans offer year-end true-up matches, meaning if you max out early, you’ll still receive your full match. Ask your HR department if your plan has this feature.

Vesting Schedules: Remember that employer contributions may be subject to vesting schedules, typically 3-6 years for full vesting.

Common Mistakes to Avoid

Don’t let these errors derail your retirement savings:

• Waiting Too Long: Procrastinating until December leaves no time to catch up if payroll systems need adjustment
• Forgetting About Catch-Up: Eligible employees often forget they can contribute beyond the standard limit
• Missing the Match: Front-loading contributions without a true-up provision can cause you to miss employer matching funds
• Not Checking Contribution Status: Review your paycheck stubs to ensure contributions are being deducted correctly
• Overlooking Roth Options: Many plans now offer Roth 401(k) contributions, which may be beneficial depending on your tax situation

What If You Can’t Max Out Your 401(k)?

Not everyone can contribute the full $23,500. If maxing out isn’t feasible, prioritize these steps:

First Priority: Contribute at least enough to capture your full employer match – this is essentially free money with an immediate 50-100% return.

Second Priority: If you have high-interest debt (credit cards), balance debt payoff with retirement contributions.

Third Priority: Consider contributing to a Roth IRA ($7,000 limit for 2025) if you have additional savings capacity but can’t max out your 401(k).

Plan for Next Year: Set up automatic contribution increases so you’re on track to max out in 2025. Many plans allow you to schedule annual percentage increases.

The key is to take action now. Contact your HR department or log into your 401(k) provider’s website today to review and adjust your contributions before the December 31 deadline passes.