The 2025 employee 401(k) contribution limit is $23,500 if you are under age 50. Workers age 50 to 59 can contribute up to $31,000 because they qualify for a $7,500 catch-up contribution, while workers age 60 to 63 can contribute up to $34,750 under the larger 2025 super catch-up rule. Once you reach age 64, the regular catch-up limit applies again.

You should contribute at least enough to capture your full employer match, because that is the highest-return money available in most retirement plans. After that, a common long-term target is saving 10% to 15% of income across retirement accounts. The right number depends on your age, salary, debt load, emergency savings, and whether you are also funding an IRA or HSA.

Employer 401(k) matching means your company adds money to your retirement account when you contribute from your paycheck. A common formula is a 50% match up to 6% of salary, which means contributing 6% unlocks an extra 3% of salary from your employer. If you contribute less than the match threshold, you leave part of that benefit behind and reduce your long-term compounding.

A reasonable long-run planning assumption for a diversified stock-heavy 401(k) is often around 6% to 7% after inflation-sensitive caution, even though equity markets have delivered higher historical averages in some periods. Using a conservative estimate is useful because retirement projections are highly sensitive to compounding. If you hold a more balanced or bond-heavy allocation, your expected return may be lower.

Yes, you can usually contribute to both a 401(k) and an IRA in the same year because they have separate contribution limits. For 2025, the IRA contribution limit is $7,000 for most savers, with an additional catch-up amount available at age 50 and older. The main caveat is that tax deductibility for a traditional IRA can phase out when you also participate in a workplace retirement plan.

When you leave a job, your 401(k) money generally remains yours, although some employer contributions may depend on vesting rules. You can often leave the account where it is, roll it into a new employer plan, or move it into an IRA. Cashing out is usually the weakest option because it can trigger current income taxes and early-withdrawal penalties while interrupting long-term compounding.

A catch-up contribution is the extra amount older workers are allowed to save above the standard annual 401(k) limit. In 2025, savers age 50 and older can contribute an additional $7,500, bringing the total employee limit to $31,000. Workers age 60 to 63 get an even larger super catch-up allowance of $11,250, which raises the 2025 total limit to $34,750.

A traditional 401(k) reduces current taxes because your contributions are generally made on a pre-tax basis, which lowers federal taxable income and often lowers state taxable income too. The immediate tax benefit depends on your marginal tax bracket and your state of residence. Payroll taxes such as Social Security and Medicare usually still apply, so the tax savings mainly come from income taxes rather than FICA.

The main difference is when you pay tax. Traditional 401(k) contributions are generally pre-tax, so they reduce taxable income today and withdrawals in retirement are taxed as ordinary income. Roth 401(k) contributions are made after tax, so they do not lower current taxable income, but qualified withdrawals in retirement can be tax-free. The better option depends on whether your tax rate is likely higher now or later.