Maximize Your 401(k)
If you’ve got a 403(b), much of this will still apply to you, but with some variations.
Get the match
To maximize your 401(k) contributions and matching, start by contributing enough to get the full employer match, if offered. Easy money, right?
Max your contributions
Then, aim to contribute the annual IRS limit, which is $23,500 in 2025. If you're 50 or older, you can also make additional catch-up contributions of $7,500. And if you’re 60-63, that catchup increases to $11,250. AND if you have 403(b) with 15+ years of service, another $3000 catchup is available.
Think about after-tax contributions
Yes, there's even more you could potentially put in! After-tax contributions to a retirement account, including a 401(k), can provide an additional way to save for retirement beyond the traditional pre-tax and Roth contributions. Here are some key points to understand about after-tax contributions:
Contribution Limit: After-tax contributions are subject to an overall contribution limit that includes all contributions (pre-tax, Roth, and employer contributions) to your 401(k) account. In 2025, the combined contribution limit, including standard employee and employer contributions, is $70,000 (or $77,500 for ages 50 and over, $81,250 for ages 60-63) or 100% of your compensation, whichever is lower.
Not Tax-Deductible: Unlike traditional pre-tax contributions, after-tax contributions are made with money that has already been taxed. They don't provide an immediate tax deduction.
Tax-Deferred Growth: While after-tax contributions don't provide a tax deduction upfront, the earnings on these contributions can still grow tax-deferred until withdrawal. This can potentially lead to more significant growth over time compared to taxable investments.
Withdrawals: When you eventually withdraw funds from your 401(k), the after-tax contributions you made can be withdrawn without incurring additional taxes. However, any earnings on those contributions are still subject to ordinary income tax at the time of withdrawal.
Mega Backdoor Roth Conversion: Some 401(k) plans then allow for in-service withdrawals or conversions, which means you can convert your after-tax contributions and their earnings into a Roth bucket list (post tax money). This is known as the "mega backdoor Roth" strategy and can provide tax-free growth potential - it may be available directly within the plan or require a rollover into an IRA outside of the plan.
Plan-Specific Rules: The availability of after-tax contributions and the rules associated with them can vary from one 401(k) plan to another. It's essential to review your plan documents or speak with your plan administrator to understand the specific rules and options available in your plan.
What if you participate in multiple retirement plans?
The IRS-imposed contribution limits for 401(k) plans that apply to the total contributions you make across all the 401(k) plans you participate in during a given calendar year. This means that if you are participating in multiple 401(k) plans, the combined contributions you make to all those plans must not exceed the annual limit set by the IRS.
For example, if the standard annual contribution limit is $23,500 and you are contributing to two separate 401(k) plans, the total contributions you make to both plans combined should not exceed $23,500.
Since 401(k) and 403(b) plans are separate types of retirement plans, the contributions you make to each plan would typically be subject to their respective individual limits. However, if you participate in both a 401(k) and a 403(b) plan simultaneously, the contribution limits for each plan would apply separately. This means you could potentially contribute up to the limit for both plans, assuming you meet the eligibility requirements and have the financial capacity to do so.
