IRS raises 2027 401(k) contribution limits: What savers need to know about the new caps

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The Internal Revenue Service has released its retirement account contribution limits for 2027, and savers will have more room to set aside money next year.

In a Thursday announcement, the agency raised the 401(k) employee deferral limit to $25,500 for 2027, up from $24,500 in 2026. The increase covers 401(k) plans, 403(b) plans and most 457 plans, as well as the federal Thrift Savings Plan.

The IRS also published 2027 catch-up contribution limits for savers 50 and older, updated individual retirement account limits, and higher income thresholds for making Roth IRA contributions.

Beginning in 2027, the catch-up contribution limit for 401(k) savers 50 and older climbs to $8,500, up from $8,000 in 2026. Workers aged 60 to 63 can contribute even more, with a special catch-up limit of $11,750 under provisions of the Secure 2.0 law. That amount is $500 higher than in 2026.

Both catch-up figures sit on top of the $25,500 standard deferral limit for 2027.

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For 2027, the IRA contribution limit holds steady at $7,500, matching the 2026 level, the IRS said. Catch-up contributions for IRA savers 50 and older remain at $1,100, unchanged from 2026.

The update arrives just one week after the IRS issued a broader set of 2027 inflation adjustments, including federal income tax brackets, higher capital gains thresholds, estate and gift tax exemptions, and several provisions affecting families.

Start by capturing your full employer match

In 2025, only 14% of participants contributed the maximum to their 401(k) plans, according to Vanguard’s 2026 How America Saves report, which drew on data from more than 1,300 qualified plans and nearly 5 million participants. The average combined savings rate, which includes employer contributions, came to an estimated 12.1%, the same report found.

“Before worrying about contribution limits, make sure you’re capturing your full employer match,” said Sean Michael Pearson, a certified financial planner with Ameriprise Financial Services in Conshohocken, Pennsylvania.

That advice carries weight: during the second quarter of 2026, roughly 19% of employees did not defer enough to their 401(k) plans to earn their employer’s full matching contribution, according to a Fidelity analysis of 27,300 corporate plans and nearly 26 million participants.

Vanguard recommends saving 12% to 15% of annual pay, including employer contributions, depending on income. Yet only about one-quarter of 401(k) participants deferred more than 10% of their earnings in 2025, the firm’s report showed.

Those aiming to max out their 401(k) in 2027 should adjust their savings rate in December so the change takes effect with the first paycheck of January, experts say. The update may take one or two pay periods to fully apply.

Raise your savings rate every year

The single most valuable habit is steadily increasing your 401(k) savings rate over time, according to Pearson.

If you raise your contribution by 1% each year, for instance, “you may barely notice the difference in your paycheck, but the long-term impact can be substantial,” he said.

In 2025, about 27% of 401(k) plans automatically escalated employee deferrals over time, a feature known as auto-escalation, according to the Plan Sponsor Council of America’s annual 401(k) survey. The nonprofit trade group’s survey covered 753 plans.

Among plans that offer auto-escalation, the vast majority, 69%, raised deferrals by 1% per year, the Plan Sponsor Council of America found.

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