4 Ways To Get More Money Into Your 401K Plan, #245
Maximizing your retirement plan contributions is one of the most powerful ways I can help you secure your financial future. As we near the end of the first quarter of 2025, it’s the perfect time to review your contributions.
In this episode, I break down how you can ensure you're contributing the maximum allowable amount and why it’s essential to do so. I explain how to calculate your contribution limits based on your salary and pay frequency, so you can easily determine how much you should be setting aside per pay period.
If you haven’t adjusted your contributions for the year, don’t worry—I’ll walk you through how to quickly get back on track to ensure you’re maximizing your retirement plan. By taking action now, you can set yourself up for greater savings down the road.
You will want to hear this episode if you are interested in...
(0:00) The importance of maximizing retirement contributions
(3:21) How to calculate maximum contributions for those under 50
(6:50) How catch-up contributions for individuals over 50 (and how to maximize these)
(8:12) A new super catch-up provision for those aged 60-63 under the Secure Act 2.0
(9:34) Employer matching contributions and how they fit into your total contribution limit
(12:03) How to convert after-tax contributions to Roth accounts to maximize growth
(14:55) The advantages of using a taxable brokerage account for additional savings
Catch-Up Contributions and Beyond: Strategies for Those Under and Over 50
For individuals under 50, the maximum contribution limit for a 401k in 2025 is $23,500. However, for those over 50, the contribution limit is higher due to the catch-up contribution provision. In 2025, individuals over 50 can contribute an additional $7,500, bringing their total contribution limit to $31,000.
This provides a significant advantage for those closer to retirement, allowing them to save more and accelerate their retirement savings as they approach their retirement years. The catch-up contribution is an important strategy for individuals over 50 to maximize their retirement accounts, while those under 50 have a lower contribution cap.
The New Super Catch-Up Provision: What Does it Mean for You?
Thanks to the Secure Act 2.0, there’s a new super catch-up contribution for those aged 60 to 63. This allows you to contribute an additional $4,000, bringing your total catch-up contribution for 2025 to $11,500. This new provision could be a game-changer if you’re getting closer to retirement.
Keep in mind, though, that not every 401k plan has adopted this new rule yet, so you’ll need to check with your plan administrator to see if you’re eligible. If your plan supports it, this is a great opportunity to accelerate your retirement savings in your final years of employment.
Leveraging the Mega Backdoor Roth IRA and Taxable Brokerage Accounts
To take your retirement savings to the next level, consider utilizing the "mega backdoor Roth IRA." This strategy involves making after-tax contributions to your 401k plan and then converting those funds into a Roth account.
The benefit is that your investments can grow tax-free in the Roth account, which can lead to significant savings in the long run. If your plan offers this option, it's an excellent way to contribute more to your retirement plan beyond the standard limits, while taking full advantage of Roth tax benefits.
For those seeking even more flexibility or earlier access to their funds before age 59½, a taxable brokerage account is a great alternative. You can invest in index funds or ETFs within this account, benefiting from favorable tax treatment on capital gains. This strategy provides more control over when and how you access your funds, and with the right investments, it can complement your retirement plan to help secure a comfortable future.
Resources Mentioned
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