One of the smartest financial moves you can make in 2025 is fully maximizing your 401(k) or 403(b) plan—even if your employer does not contribute a single dollar. These accounts offer powerful tax benefits that can compound significantly over time, but too many people underuse them.
What Does “Maximizing” Really Mean?
In 2025, here are the annual contribution limits for employees:
• $23,500 if you are under 50
• $31,000 if you are 50 or older (includes a $7,500 catch-up contribution)
• $34,750 if you are between 60 and 63 (includes an $11,250 “super catch-up”)
These limits apply to your personal contributions. They do not include employer contributions or investment growth.
Why You Should Contribute Even Without a Match
Many people believe that if their employer doesn’t offer a match, contributing is not worth it. That is simply wrong.
Let’s break it down with a quick example:
- You are in the 24% federal tax bracket
- You live in California, where the state tax is 9.3%
- Your combined marginal rate is 33.3%
➡️ That means every $1,000 you contribute to your 401(k) reduces your tax bill by $333.
That’s an instant, risk-free return of 33.3%—before your money even starts growing.
Very few investments can match that kind of guaranteed benefit in year one.
Traditional vs. Roth 401(k): Which Is Right for You?
The key question to ask is:
Will your tax bracket be lower in retirement than it is today?
| Current Federal Tax Bracket | Suggested Account Type |
|---|---|
| 10% / 12% / 22% | Roth 401(k) |
| 32% / 35% / 37% | Traditional 401(k) |
| 24% | Depends on your situation |
Also consider your state income tax, which can tip the balance.
General Rule
If you’re in a high tax bracket now, it usually makes sense to go pre-tax. Your retirement income will likely be lower and taxed at a lower rate.
Can You Access Funds Later?
Yes—starting at age 59½, you can begin withdrawing from your 401(k) without early withdrawal penalties. Note that regular income taxes still apply to Traditional 401(k) distributions.
At age 73, Required Minimum Distributions (RMDs) begin. This means you’ll have to withdraw a minimum amount each year and pay taxes on it, whether you need the money or not.
Summary: How to Make the Most of Your 401(k) or 403(b) in 2025
✅ Contribute the maximum amount allowed
✅ Pick Roth or Traditional based on your current and future tax rates
✅ Ignore the match myth—no match still means major tax savings
✅ Start now—the earlier you contribute, the more time your money has to grow
Get Personalized Advice
Want help making the right choice for your situation?
📅 Book a free consultation today —your future self will thank you.
Guillaume Decalf is an SEC-registered financial advisor *(CRD #7003690 – Firm CRD #298549) and founder of We Financial Group. He has advised over 600 households and manages more than $100 million in client assets (as of December 31, 2024).
*Registration with the SEC does not imply a certain level of skill or training. For more information, visit adviserinfo.sec.gov.
