IRS announces 2027 401(k) contribution limits, raises savings cap: What it means for your money - CNBC

The IRS has announced new retirement account contribution limits for 2027.

In its release on Thursday, the agency increased the 401(k) employee deferral limit to $25,500 next year, up from $24,500 in 2026. The change applies to 401(k)s, 403(b)s and most 457 plans, along with the federal Thrift Savings Plan. 

The IRS also unveiled 2027 catch-up contribution limits for savers age 50 and older, new individual retirement account savings limits and higher income thresholds for Roth IRA contributions.  

Starting in 2027, the 401(k) catch-up contribution limit will rise to $8,500 for savers 50 and older, up from $8,000 in 2026. But investors aged 60 to 63 can instead save an extra $11,750, based on changes enacted via Secure 2.0. That figure is up $500 from 2026.

Both amounts are in addition to the $25,500 deferral limit for 2027.  

The 2027 IRA contribution limit is $7,500, unchanged from 2026, the IRS announced. IRA catch-up contributions for investors age 50 and older will be $1,100, the same as 2026.  

The announcement comes one week after the agency released dozens of other inflation adjustments for 2027, including federal income tax brackets, higher capital gains brackets, estate and gift tax exemptions and provisions impacting families, among others.

In 2025, only 14% of participants maxed out their 401(k)s, according to Vanguard's 2026 How America Saves report, which was based on data from more than 1,300 qualified plans and nearly 5 million participants. The average combined savings rate, including employer deposits, was an estimated 12.1%, according to the same 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 Financial Services in Conshohocken, Pennsylvania.

During the second quarter of 2026, about 19% of employees weren't deferring enough to 401(k)s to receive their company's full matching contribution, according to a Fidelity analysis of 27,300 corporate plans and nearly 26 million participants.

Vanguard suggests saving 12% to 15% of your pay per year, including employer contributions, depending on your income. But only one-quarter of 401(k) participants deferred more than 10% of earnings in 2025, according to Vanguard's report.

If you plan to max out your 401(k) for 2027, you should change your savings rate in December so it's active by your first January paycheck, experts say. The update could take one or two pay periods to go into effect.

The "most important habit" is consistently increasing your 401(k) savings rate over time, according to Pearson.

For example, if you bump 401(k) contributions by 1% every year, "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 increased employee deferrals over time, known as "auto-escalation," according to the Plan Sponsor Council of America's yearly survey of 401(k)s. The nonprofit trade organization's survey included 753 plans.

The vast majority of plans with auto-escalation, 69%, boosted deferrals by 1% per year, the Plan Sponsor Council of America found.