The New Year Might Bring a Surprise Bump in Your 401(k) Contributions: Here’s How to Check Before Your First Paycheck

Farewell, 2025. Hello… smaller paycheck? Many Americans who contribute to a 401(k) could be in for a surprise as their first direct deposit of the year lands this week: an automatic increase in elective deferrals that may shrink what lands in their bank account.

• A large number of 401(k) plans automatically bump up contribution percentages each year, often by 2% — meaning more money coming out of each paycheck.
• To see if your plan does this, sign into your 401(k) account and review or change your elective contributions before your first pay period hits.

What should you do about it? The automatic “step up” in employee contributions exists in part because most Americans are undersaving for retirement. As a general rule, saving at least 15% of your income each year (including employer match) is a solid target for building enough retirement savings. That makes now the best time to check in on your workplace plan — especially if you’re aiming to make progress toward the higher $24.5K deferral limit this year.