The IRS has announced that the employee deferral limit for 401(k) plans will rise to $25,500 in 2027, an increase from $24,500 in 2026. This adjustment applies to various retirement plans, including 403(b)s and most 457 plans.
Additionally, the catch-up contribution limit for those aged 50 and older will increase to $8,500, while individuals aged 60 to 63 can contribute an extra $11,750, reflecting changes from the Secure 2.0 Act. The IRA contribution limit remains unchanged at $7,500, with catch-up contributions for older investors also staying the same at $1,100.
This announcement follows a broader release of inflation adjustments by the IRS, which included changes to federal income tax brackets and other tax provisions.
Notably, a report from Vanguard indicated that only 14% of 401(k) participants maximized their contributions in 2025, emphasizing the need for investors to ensure they are receiving their full employer match before focusing on contribution limits. Financial experts recommend increasing 401(k) contributions annually, as even a small increase can significantly impact long-term savings.
The Plan Sponsor Council of America found that 27% of 401(k) plans implemented auto-escalation features to help employees gradually increase their contributions