Most workers pick their 401(k) contribution rate once, usually at their first open enrollment or when they sign the offer paperwork, and that’s the last time they think about it.

The same percentage keeps getting pulled from each paycheck for years. Some of them could not tell you what it is without logging in to check.

Every November, the IRS updates the limits on how much workers can shelter in tax-advantaged retirement accounts for the following year. This year’s announcement came on Nov. 12, with a number that gives anyone still running the same old rate a real reason to log back in.

The 401(k) contribution limit for 2027 is $25,500, up $1,000 from the $24,500 ceiling in 2026, the IRS announced Nov. 12. That figure covers 401(k) and 403(b) accounts, most 457 plans, and the federal Thrift Savings Plan. Workers 50 and older have a separate catch-up allowance of $8,500 on top of the standard limit, up from $8,000 this year.

What the 2027 401(k) numbers mean

Workers aged 60 through 63 get a higher catch-up under the Secure 2.0 law: $11,750 for 2027, up $500 from 2026. That puts their total potential contribution at $37,250 for the year, assuming their plan allows the higher amount. It is the largest window the tax code currently offers any saver in a 401(k).

Also read: Social Security announces new cost-of-living adjustment for 2027

The $25,500 cap covers all elective deferrals into a 401(k). Workers with both a traditional and a Roth 401(k) share one combined ceiling across both account types. Splitting contributions between the two does not increase the total amount that can be deferred. It is one limit, applied to everything going in.

IRA limits are not moving for 2027. Workers can still put up to $7,500 into a traditional or Roth IRA, same as this year. The $1,100 catch-up for savers 50 and older did not change, either. That does not shift the math much for anyone already funding both accounts, though some will also be sorting through the 2027 tax bracket changes at the same time.

The IRS did raise the income thresholds for Roth IRA contributions. Those phase-out ranges move up each year with inflation, so more workers qualify to contribute directly in 2027 than did in 2026.

Workers whose income still puts them above the limit have other routes. A traditional IRA or a 401(k) handles the tax-deferred savings side differently, with the tax break coming later rather than now.

Why the employer match comes first

Before contribution limits become relevant, the employer match does. Financial planner Sean Michael Pearson told CNBC that workers should make sure they are capturing the full employer match before focusing on annual ceilings. The logic is straightforward: an unmatched dollar is still a dollar saved, but a matched dollar can double in value before it is ever invested.

Close to one in five workers was not making the most of that in 2026. During the second quarter, about 19% of employees were not deferring enough to receive their company’s full matching contribution, according to CNBC, citing Fidelity’s analysis of 27,300 corporate plans and nearly 26 million participants.

The gap between what workers could have received and what they left behind adds up quickly over a career.

Match structures differ from one employer to the next. A dollar-for-dollar match up to 3% of pay works out very differently than 50 cents on the dollar up to 6%. It is worth reading the plan documents to know which one applies.

The other detail worth finding out is whether the match is calculated per paycheck or on an annual basis. Front-loading contributions early in the year and pulling back later can mean some paychecks go unmatched, even when the total going in for the year looked fine on paper.

Workers who want to reach the new limit starting in January should update their deferral rate before the end of December.

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Most workers are well below the 401(k) contribution cap

Only 14% of participants maxed out their 401(k)s, according to Vanguard’s 2025 How America Saves report, which covered nearly 5 million participants across its recordkeeping platform. The other 86% finished the year somewhere below the ceiling. The annual limit is a relevant number for a relatively small share of the workforce.

Vanguard’s guidance is to save between 12% and 15% of pay each year, with employer contributions counted toward that figure. Only about one in four participants was above 10% in 2025.

Those two numbers do not line up. For a lot of workers, 10% is still the goal, not some baseline they have already cleared.

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The IRS ceiling is not what most workers are actually aiming for. Getting the full employer match is. After that, raising the deferral rate by a point or two as income grows is the more realistic path for most households.

The annual cap is something people reach later in a career, if they get there at all.

How to increase 401(k) contributions heading into 2027

Workers who want to reach the new limit starting in January should update their deferral rate before the end of December. Changes to contribution elections typically take one or two payroll cycles to take effect. Acting in December puts the new rate in place for the first paycheck of the year, rather than leaving a gap at the start of 2027.

For workers not ready to jump straight to the new limit, one more percent is a reasonable place to start. Pearson said a single percentage point rarely registers in a paycheck in any noticeable way. The difference turns up in the account balance over time. It does not show up right away, but it shows up.

Some plans handle the increase automatically. Vanguard’s 2026 How America Saves report found that 71% of plans on its platform include auto-escalation, the highest level in years. Workers whose plans offer that feature should check that it is switched on.

Those whose plans do not have it can set a calendar reminder to make the same adjustment manually at the start of each year. The discipline matters more than the size of any single increase.

Related: Fidelity and Vanguard issue a sobering outlook for retirees