In good news for workers with membership in Roth 401(k)s, 2025 has increased contribution limits. This retirement strategy, especially suitable for those expecting a higher tax rate after stopping work, grants after-tax contributions and tax-free withdrawals in retirement.
Contribution limits for Roth 401(k) plans jumped $500 compared with 2024. Contributions from employees under the age of 50 will reach $23,500 in 2025 as part of the increase. The catch-up limit remains $7,500 for those 50 and over, which permits a total of $31,000 in contributions annually.
Boosts for employees aged 60 to 63
As a result of the SECURE 2.0 Act, there is a special advantage of working in your early 60s. Beginning with 2025, it welcomes all workers aged 60, 61, 62, or 63 into its enhanced catch-up contribution limit. Such contributions would be made, not to the stipulated $7,500 limit, but to a whopping $11,250 in addition. Their full annual limit would total to $34,750.
For the late-career employee trying to catch up on retirement savings close to the time of retirement, this shows to be very beneficial. Contributions must typically be made by the end of the calendar year.
Limit on employer contribution and maximum for plan
Finally, while your maximum personal contribution is set, the total amount that can accumulate into a Roth 401(k)—including those supplied by your employer—has also increased. For 2025, the employee and employer combined contribution limit is $70,000, compared to $69,000 in 2024.
Employer contributions go into a traditional 401(k) even if you are contributing to a Roth 401(k). This means those employer dollars will be taxed when withdrawn in retirement.
A comparison of the Roth 401(k) and the other 401(k) plan
The Roth 401(k) is something of a hybrid between a regular 401(k) and a Roth IRA. Similar to a Roth IRA, contributions are done with after-tax dollars, meaning that you do not take a tax deduction on the contribution now, but the money grows tax-free and can be withdrawn tax-free when you retire, provided you are at least 59 and a half years old and have held the account at least five years.
Unlike Roth IRAs, Roth 401(k)s have no income limits, which is a big plus for high earners. Also, the contribution limits are far greater than for IRAs. In 2025, Roth IRA contributions remain stuck at $7,000, plus a $1,000 catch-up for those older than 50.
Remember required minimum distributions
Roth 401(k)s incur required minimum distributions (RMDs) starting at age 73, unlike Roth IRAs, which are exempt from RMDs. Many retirees cash out their Roth 401k into an IRA for this reason.
Bottom line
Whether starting their career or in their waning years, Roth 401(k) contribution limits are increased for 2025 to allow greater tax-free retirement income buildup. Use these limits and plan your taxes long-term.
