The IRS Raised the 401(k) Contribution Limit to $25,500 for 2027

The Internal Revenue Service raised the amount workers can set aside in a 401(k) next year, CNBC reported Thursday.

The employee deferral limit will be $25,500 in 2027, up from $24,500 in 2026. The change also applies to 403(b) plans, most 457 plans and the federal Thrift Savings Plan. Catch-up contributions for savers age 50 and older will rise to $8,500, from $8,000. Investors ages 60 to 63 can instead save an extra $11,750, $500 more than in 2026, under a Secure 2.0 provision. Both catch-up amounts are in addition to the $25,500 deferral limit. The IRA contribution limit will remain $7,500, and the IRA catch-up for those 50 and older will stay $1,100.

The announcement came a week after the agency released other 2027 inflation adjustments, including income-tax brackets, capital-gains brackets, and estate and gift tax exemptions, CNBC reported. The IRS also set new income thresholds for Roth IRA contributions.

Most workers are not near the cap

In 2025, only 14% of participants maxed out their 401(k)s, according to Vanguard's 2026 How America Saves report, which covered more than 1,300 plans and nearly 5 million participants. The average combined savings rate, including employer deposits, was an estimated 12.1%. Vanguard suggests saving 12% to 15% of pay per year, including the employer match, depending on income, but only a quarter of 401(k) participants deferred more than 10% of earnings in 2025. A Fidelity analysis of 27,300 corporate plans and nearly 26 million participants was also cited in the report.

"Before worrying about contribution limits, make sure you're capturing your full employer match," said Sean Michael Pearson, a certified financial planner with Ameriprise, CNBC reported. He called consistently raising a savings rate "the most important habit." Bumping contributions by 1% a year, he said, is a change "you may barely notice" in a paycheck, with a larger long-term effect. In 2025, about 27% of 401(k) plans automatically increased employee deferrals over time, according to a Plan Sponsor Council of America survey of 753 plans; 69% of those with auto-escalation raised deferrals by 1% a year.

Experts told CNBC that workers who plan to max out a 401(k) in 2027 should change their savings rate in December so it is in effect by the first January paycheck, because the update can take one or two pay periods.