IRS Raises 2027 401(k) Limit to $25,500: What to Do Now

The IRS just gave your 401(k) more room. On November 12, 2026, the agency announced the official 2027 retirement plan limits in news release IR-2026-136 and Notice 2026-66: the employee deferral limit for 401(k), 403(b), most 457(b) and Thrift Savings plans rises $1,000 to $25,500 for 2027, up from $24,500 in 2026. The age-50 catch-up climbs to $8,500, and the special 60-to-63 catch-up reaches $11,750.

Here’s the twist that makes this year’s announcement worth a second look: the IRA limit didn’t move at all. It stays at $7,500 for 2027, with the same $1,100 catch-up for savers 50 and older. If you split your retirement saving between a workplace plan and an IRA, the two accounts are now moving in different directions — and the reason comes down to how each limit is indexed to inflation.

This is the full picture: every official 2027 limit, what the extra $1,000 costs per paycheck, the open-enrollment move to make before your first January paycheck, and whether maxing out the new limit is actually the right call for you.

The 2027 limits at a glance

The IRS sets these numbers every fall from inflation data, and the 2027 round is now official — not a forecast. The 401(k) figures come from the third-quarter CPI-U average, which closed at 335.279, reflecting 3.7% inflation, rounded down to the nearest $500 increment.

A few things in that table deserve unpacking, because the headline number is the least interesting part.

First, the $25,500 limit covers your own elective deferrals only — the money that comes out of your paycheck before tax (or after tax, if you use the Roth 401(k) option). It does not include your employer’s match or profit-sharing contributions. The combined ceiling for everything going into your account, yours plus your employer’s, is the annual additions limit, which rose to $75,000.

Second, the catch-up tiers stack on top of the base limit. A 52-year-old can put in $25,500 plus $8,500, for $34,000 total in 2027. Someone who turns 60, 61, 62 or 63 during 2027 gets the bigger “super” catch-up of $11,750 instead of the regular $8,500 — $37,250 all in. The moment you turn 64, you’re back to the regular $8,500 catch-up. That four-year window is a SECURE 2.0 provision, and it’s easy to miss if your plan doesn’t flag it for you.

Third, the SIMPLE plan limit rose $500 to $17,500. If you work for a small business on a SIMPLE IRA, that’s a meaningful raise.

What the extra $1,000 actually costs per paycheck

A $1,000 annual raise in the limit sounds abstract until you turn it into a paycheck number. Here’s the math.

If you’re paid biweekly (26 paychecks a year), raising your election by the full $1,000 means $38.46 more per paycheck going into the 401(k). But that’s the pre-tax number. Because traditional 401(k) contributions reduce your taxable income, your take-home pay drops by less than $38.46. In the 22% federal bracket, the take-home hit is roughly $30 per paycheck — about $780 over the year for $1,000 more in retirement savings. In the 12% bracket, it’s about $34 per paycheck.

That’s the number to keep in mind during open enrollment: roughly $30 a paycheck buys you the full $1,000 increase. If your budget can’t stretch to the full amount, even half of it — $500 more a year, about $15 per paycheck after tax — is worth doing. The limit is a ceiling, not a target you have to hit in one jump.

One timing detail matters: the 2027 limits apply to paychecks dated in calendar year 2027. An election change you make during open enrollment takes effect with your first January paycheck. If you wait until February to update your deferral percentage, you’ve already lost a month of the higher limit — and you can’t go back and fill it in, because the limit is measured by the calendar year, not by when you got around to the paperwork.

Why the IRA limit didn’t move

This is the part that confuses people every year, so let’s be plain about it: the 401(k) limit and the IRA limit are indexed to different inflation measures.

The 401(k) deferral limit is tied to the CPI-U — the standard Consumer Price Index for All Urban Consumers — measured over the third quarter. The IRA limit is tied to the chained CPI-U, a slower-moving measure that accounts for consumers substituting cheaper goods when prices rise. In 2026, the chained CPI-U didn’t climb enough to push the IRA limit past its next $500 step, so it stays at $7,500.

The practical consequence: if you max out both accounts, your total 2027 room is $25,500 plus $7,500 — $33,000 before catch-ups — and all of the growth in that total came from the workplace-plan side. If your income is high enough that the Roth IRA phase-outs matter, note that those moved up too: single filers can now contribute to a Roth IRA with modified adjusted gross income up to $158,000 (phasing out completely at $173,000), and joint filers up to $250,000 (phasing out at $260,000). That $5,000–$8,000 lift means some savers who were phased out in 2026 get Roth IRA access back in 2027.

Should you max out the new $25,500 limit?

The honest answer: it depends on where the money would otherwise go, and the order matters more than the limit itself. Here’s the decision framework I use.

Step 1: Grab the full employer match first. If your employer matches contributions, contribute at least enough to get every dollar of it. A typical match — say 50 cents per dollar on the first 6% of pay — is an instant 50% return. Nothing else in personal finance beats that, and no tax argument changes it. If you’re not getting the full match today, fix that before you think about the new limit.

Step 2: Kill high-interest debt before extra retirement saving. Credit card debt at 22% interest costs you more than a 401(k) earns. The one exception is the match in step 1 — take the free money, then attack the debt.

Step 3: Then push toward the max. Once the match is captured and expensive debt is gone, extra 401(k) contributions are usually the best use of long-term savings dollars, because of the tax deferral and the higher 2027 ceiling.

To see what the extra $1,000 a year is actually worth, run the compounding math. An additional $1,000 contributed every year, earning a 7% average annual return, grows to about $41,000 after 20 years and about $94,500 after 30 years. That’s just the extra $1,000 a year — on top of whatever you’re already saving. The 2027 raise isn’t a windfall, but over a career, the annual $500–$1,000 bumps compound into real money. That’s why the IRS announces these numbers every November: each year’s small increase is a chance to nudge your savings rate up by an amount you’ll barely feel in your paycheck.

There’s also a less obvious reason to act now rather than later. Most people set their deferral percentage once and forget it for years. Open enrollment is the one moment a year when the paperwork is already in front of you. Raising your rate by one percentage point during open enrollment is a five-minute task; doing it in March requires logging into the plan portal on your own initiative, which most of us never do.

The open-enrollment checklist for the 2027 limits

Do these before your first January 2027 paycheck:

1. Check your current deferral rate. Log into your plan portal and look at the percentage, not just the dollar amount. If you set 10% of a $90,000 salary, that’s $9,000 a year — well under the new limit, and there’s room to grow.
2. Decide on the new amount. If you want the full $25,500, divide it by your number of paychecks. On a $110,000 salary paid biweekly, that’s $981 per paycheck, or about 23% of gross pay. If that feels like too much at once, split the difference: raise your rate by 1–2 percentage points now and set a calendar reminder to revisit it in six months.
3. Check the catch-up if you’re 50 or older. Your plan may require you to elect catch-up contributions separately. If you turn 60, 61, 62 or 63 in 2027, ask your plan administrator whether the $11,750 super catch-up is applied automatically — some plans need you to opt in.
4. Confirm the Roth catch-up rule. Under SECURE 2.0, catch-up contributions must go in as Roth (after-tax) contributions for higher earners — generally those who earned over $145,000 in the prior year. The rule took effect in 2026, so if it applies to you, your 2027 catch-up dollars will be Roth, not pre-tax. Worth confirming with your plan administrator so the tax treatment doesn’t surprise you.
5. Don’t forget the IRA side. The IRA limit is flat at $7,500, but the higher Roth phase-outs may reopen Roth IRA eligibility for you in 2027. If you were phased out in 2026, recheck your income against the new $158,000–$173,000 single / $250,000–$260,000 joint ranges.
6. Freelancers and side-hustlers: the solo 401(k) got the same raise. If you have self-employment income, a solo 401(k) follows the same $25,500 employee limit, and the total limit (your contributions plus the employer-side profit-sharing you pay yourself) rose to $75,000. The deadline mechanics for solo plans are different from employer plans — our guide to the solo 401(k) deadline walks through the December 31 setup date and what has to be in place before year-end.
7. Review your investment mix while you’re in there. A limit change is a good excuse to check that your contributions are actually invested — not sitting in a money-market default — and that your allocation still matches your age and risk tolerance.

The bigger 2027 picture

The 401(k) announcement landed in a busy week for retirement numbers. Social Security confirmed a 3.6% cost-of-living adjustment for 2027 back on October 14, and the IRS had already set the 2027 HSA limits in May — $4,500 for self-only coverage and $9,000 for family coverage. The 2027 tax brackets and standard deduction were announced November 5 in Revenue Procedure 2026-35. Taken together, the 2027 figures tell a consistent story: inflation adjustments are still moving up, just more slowly than the big jumps of 2022 and 2023.

One more piece of context: the IRS’s own framing of the announcement emphasized that the increases “help American families keep more of their hard-earned income,” in the words of IRS chief executive Frank Bisignano. That’s the political gloss, but the practical point stands — every dollar you shelter in a 401(k) is a dollar that isn’t taxed this year, and the 2027 ceiling gives you $1,000 more of that shelter than 2026 did.

For savers who were already maxing out, the move is simple: bump the election by $1,000 and forget about it. For everyone else, the new limit is a prompt, not a demand. The best savings rate is the one you can hold through a bad month without raiding the account — and a limit increase you can’t sustain is worse than a smaller one you can.

Frequently Asked Questions

What is the 401(k) contribution limit for 2027?

$25,500 for employee elective deferrals to 401(k), 403(b), most 457(b) and Thrift Savings plans, up from $24,500 in 2026. The IRS announced it on November 12, 2026, in news release IR-2026-136 and Notice 2026-66.

How much can I contribute to my 401(k) in 2027 if I’m over 50?

$34,000 — the $25,500 base limit plus the $8,500 age-50 catch-up. If you turn 60, 61, 62 or 63 during 2027, the super catch-up of $11,750 applies instead, for a total of $37,250. At 64 and older, you’re back to the regular $8,500 catch-up.

Did the IRA limit go up for 2027?

No. The IRA contribution limit stays at $7,500 for 2027, with the same $1,100 catch-up for savers 50 and older. The IRA limit is indexed to the chained CPI-U, which didn’t rise enough to trigger an increase, while the 401(k) limit follows the standard CPI-U.

When do the new limits take effect?

The 2027 limits apply to contributions from paychecks dated in calendar year 2027. If you change your deferral election during open enrollment, it typically takes effect with your first January paycheck. You cannot apply 2027 limits to 2026 paychecks.

Can I still contribute to a Roth IRA in 2027?

It depends on your income. For 2027, single filers can make a full Roth IRA contribution with modified adjusted gross income under $158,000, phasing out completely at $173,000. For married couples filing jointly, the range is $250,000 to $260,000. Both ranges moved up from 2026, so some savers who were phased out last year regain eligibility.

What about my solo 401(k) or SIMPLE plan?

A solo 401(k) follows the same $25,500 employee deferral limit, with a total limit (employee plus employer contributions) of $75,000 for 2027. SIMPLE IRA and SIMPLE 401(k) deferrals rise to $17,500. If you run a solo 401(k), check the setup deadlines in our solo 401(k) deadline guide and the SEP IRA deadline rules if you’re weighing a SEP instead.

This article is general information, not professional tax or financial advice. Contribution limits and tax rules change, and your plan may have its own rules — check your plan documents or talk to a qualified tax professional before making changes.