The IRS raised 401(k) contribution limits for 2027, giving workers another opportunity to save more for retirement on a tax-advantaged basis. If you maximize your contributions, you can now shelter an additional $500 from current income tax compared to 2026.

The New Limits for 2027

According to the Internal Revenue Service, the 2027 employee contribution limit for 401(k), 403(b), and most 457 plans increased to $24,500 for workers under age 50. That represents a $500 increase from the 2026 limit of $24,000.

Workers age 50 and older can contribute an additional $8,000 in catch-up contributions, bringing their total allowable contribution to $32,500 for 2027.

Age Group2026 Limit2027 LimitIncrease
Under 50$24,000$24,500$500
50 and older$31,500$32,500$1,000

These limits apply to elective salary deferrals only and do not include employer matching contributions. Total contributions from all sources (employee plus employer) have a separate, higher limit set by the IRS each year.

What the Increase Means in Practice

An extra $500 per year may sound modest, but compound growth over decades makes every contribution increase valuable. A 35-year-old who contributes the additional $500 annually and earns an average 7 percent return would accumulate roughly $52,000 more by age 65, just from this one year’s limit increase carried forward.

The tax benefit applies immediately. If you are in the 24 percent federal tax bracket and contribute the full $24,500, you reduce your current-year taxable income by that amount, saving approximately $5,880 in federal taxes (state tax savings may also apply depending on your location). Those funds grow tax-deferred until withdrawal in retirement, as covered in foundational texts such as Principles of Finance.

Read also: IRS Raises 401(k) and IRA Contribution Limits for 2026

Catch-Up Contributions for Older Workers

The catch-up provision remains one of the most powerful tools for workers nearing retirement. The U.S. Department of Labor notes that 401(k) plans must allow catch-up contributions if they accept any elective deferrals, giving workers 50 and older the opportunity to accelerate savings in the final working years when earnings often peak and expenses may decline.

Starting in 2025, SECURE 2.0 also introduced an enhanced catch-up limit for participants aged 60 to 63, set at the greater of $10,000 or 150 percent of the regular catch-up amount, indexed for inflation. Verify the 2027 amount for this super catch-up provision directly with your plan administrator, as it adjusts annually.

Making the Most of the New Limit

If you currently contribute a fixed dollar amount per paycheck rather than a percentage, update your payroll election to capture the new limit. Many employers allow changes at any time, not just during open enrollment. Check your year-to-date contributions in your 401(k) account dashboard to ensure you stay on pace.

If you cannot afford to max out the limit, contribute at least enough to capture your full employer match. That match is immediate, guaranteed return on your savings. Then increase your contribution rate by 1 percent each year, or whenever you receive a raise, until you reach the annual maximum.

Remember that these are educational limits for 2027 as of September 2026. Contribution limits adjust annually based on inflation, and the IRS typically announces the following year’s figures in late October or early November. According to Investopedia, monitoring these annual changes helps you plan your retirement savings strategy year over year.

This information is educational and not personalized investment or tax advice. Consult a certified financial planner or tax professional to determine the contribution strategy appropriate for your specific financial situation and retirement timeline.