Retirement planning is changing in 2025, which means now is the perfect time to take a look at your retirement savings and make sure you're on track. These updates, part of the Secure Act 2.0 passed in 2022, aim to enhance retirement savings opportunities and make things easier for "max savers."
One of the best ways to save for retirement is through a 401(k) plan, especially if your employer offers matching contributions. The IRS has increased the contribution limits for 401(k) plans in 2025 to $23,500, up from $23,000 in 2024. This gives you even more room to stash away money in this tax-advantaged account. So, with these new numbers, how much should you aim to contribute this year?
Follow the 10% rule
Financial experts recommend saving 10-15% of your gross income for retirement. For example, if you make $60,000 a year, you would want to save $6,000–$9,000 annually. With the 2025 401(k) limit of $23,500, the 10% rule means you'd have to be a pretty high earner to start worrying about that contribution limit. For example, if you earn $80,000 per year, 10% of your income is $8,000. That amount is well under the $23,500 contribution limit, allowing you to follow the 10% rule while maxing out the tax benefits of your 401(k).
Increased catch-up contributions for near-retirees
The other big change coming this year: Employees aged 60–63 will be able to make larger catch-up contributions to their 401(k) plans, with new limits set at either $10,000 annually or 150% of the standard catch-up contribution limit—whichever amount is greater.
This expansion of catch-up contribution limits provides a valuable opportunity for workers to boost their retirement savings during their peak earning years. More than half of 401(k) participants with income above $150,000 and nearly 40% with an account balance of more than $250,000 made catch-up contributions in 2023, according to Vanguard’s 2024 How America Saves report.
Determine what you can afford
Look at your monthly take-home pay and expenses. Figure out where you can trim costs and funnel more toward retirement. Even small cuts like bringing lunch to work or canceling unused subscriptions can make a difference.
Ideally, aim to contribute at least enough to get any matching funds from your employer. That's free money you don't want to miss out on. If your employer matches up to 5% of income, then at minimum you should contribute that percentage.
Aim to increase your contribution by at least 1%
Can't commit to 10% yet? That's OK, and completely understandable. That number is common wisdom in the personal finance world, but everyone's financial situation is different. To start, wherever you are right now, consider boosting your contribution rate by just 1% this year. That minor change will help grow your nest egg over time without too big a lifestyle sacrifice. And you can repeat it each year until you reach your target savings rate.
The key is to start saving as early as possible and be consistent. If you’re not sure how much to aim for, meet with a financial advisor who can help you fine-tune your savings plan.
