There's a phrase financial advisors repeat so often it's become a cliche: employer 401(k) matching is free money. But cliches become cliches because they're true—and December 31 represents the last chance for workers to capture every dollar of that free money for 2025.

For employees whose companies match retirement contributions, the math is stark. An employer that matches 50% of contributions up to 6% of salary is effectively offering a 3% raise to workers who participate fully. Walk away from that match, and you're declining compensation you've already earned.

The Deadline That Matters

Unlike IRA contributions, which can be made until April 15 of the following year, 401(k) contributions must be made by December 31 of the tax year. That means your final paycheck of 2025—likely hitting accounts within the next day or two—represents your last chance to contribute for the year.

For most workers, making changes to 401(k) contribution rates now won't help for 2025. Payroll systems typically require advance notice to adjust withholding. If you haven't already increased your contribution rate, the 2025 window has likely closed.

But here's what you can do: log into your 401(k) account today and confirm your contribution rate for 2026. Many plans allow changes effective January 1, and starting the new year at your target contribution rate prevents the same last-minute scramble next December.

2025 Contribution Limits

The IRS sets annual limits on how much employees can contribute to 401(k) plans:

  • Standard limit: $23,500 (for workers under 50)
  • Catch-up contribution: Additional $7,500 for workers 50 and older
  • Super catch-up: Workers aged 60-63 can contribute an extra $11,250, for a total of $34,750
  • Total limit (including employer contributions): $70,000 ($77,500 with catch-up)

These limits apply to your total employee contributions across all 401(k) plans, including traditional and Roth 401(k) accounts.

The True-Up Question

One of the most important questions to ask your HR department: does your employer offer true-up matching?

Here's why it matters. Say your employer matches 50% of contributions up to 6% of your $100,000 salary—potentially $3,000 in free money. If you contribute steadily throughout the year ($1,917 per month to hit the $23,000 limit), you'll get matching contributions on every paycheck.

But if you front-load contributions and hit the $23,000 cap by June, you stop contributing—and if your employer only matches per paycheck, you could miss six months of matching contributions.

True-up provisions solve this problem. Employers with true-up features calculate your annual match at year-end and make a supplemental contribution if you didn't receive the full match throughout the year. Not all employers offer this, and the difference can be worth thousands of dollars.

Common Matching Formulas

Employer matches vary widely. Common structures include:

  • Dollar-for-dollar up to 3%: Employer matches 100% of your first 3% of salary contributed
  • 50 cents on the dollar up to 6%: Employer matches half of your contributions up to 6% of salary (effective 3% match)
  • Fixed percentage: Employer contributes a set percentage regardless of your contribution
  • Tiered matching: Higher match rates on initial contributions, lower rates on additional amounts

If you don't know your company's formula, check your benefits portal or ask HR. Understanding the match structure is essential to optimizing your contributions.

Roth vs. Traditional: A Quick Reminder

Many 401(k) plans now offer both traditional (pre-tax) and Roth (after-tax) contribution options. December 31 is also the deadline to ensure your contribution type aligns with your tax strategy.

  • Traditional: Contributions reduce taxable income now; withdrawals taxed in retirement
  • Roth: Contributions made with after-tax dollars; withdrawals tax-free in retirement

For workers expecting higher tax rates in retirement (younger workers, those with rising incomes), Roth often makes sense. For those near peak earnings who expect lower retirement tax rates, traditional may be better.

Note that employer matching contributions always go into the traditional side, regardless of whether you contribute to Roth or traditional.

Action Items Before Year-End

With one day left in 2025, here's your checklist:

  1. Verify your 2025 contributions: Log into your 401(k) account and confirm your total employee contributions for the year
  2. Check for employer match received: Compare matching contributions received to your employer's match formula
  3. Set 2026 contribution rate: Increase your rate now if you weren't maximizing in 2025
  4. Ask about true-up: Contact HR to understand whether your employer makes year-end true-up contributions
  5. Consider the super catch-up: If you're turning 60-63 in 2026, you may be eligible for higher limits

The Cost of Waiting

Leaving employer matching dollars on the table has compounding consequences. A 30-year-old who misses $3,000 in annual employer matches isn't just losing $3,000—at 7% annual returns, that single year's missed match would have grown to over $22,000 by age 65.

Multiply that by multiple years of under-contributing, and the retirement shortfall becomes substantial. December 31 is just another day on the calendar, but for your retirement security, it's a deadline worth respecting.