2027 401(k) Limit: Why September's CPI Decides $25,500

The IRS has not announced the 2027 401(k) contribution limit yet, but most of it is already decided. The formula is written into the tax code, two of the three inflation readings it uses are published, and the third — September's Consumer Price Index — comes out on Tuesday, October 14, 2026. That one number decides whether the most you can put into a 401(k) next year is $25,500 or $25,000, and whether the age-50 catch-up rises to $8,500 or stays at $8,000.

This guide is for employees who contribute to a 401(k), 403(b), governmental 457(b) or the federal Thrift Savings Plan — the same employee limit applies to all four. It does not cover IRA limits, SIMPLE IRAs or health savings accounts, which follow different formulas (the 2027 HSA limits are already final; see HSA vs FSA for 2027).

How the limit is setA formula, not a decision

Nobody at the IRS chooses the number. Section 402(g) of the Internal Revenue Code starts from $15,000, and section 415(d) tells the Treasury how to raise it each year: take the average of the Consumer Price Index for July, August and September, compare it with the same three months of 2005, and apply the increase. Any increase that is not a multiple of $500 is rounded down to the next $500.

196.867 is the July–September 2005 average of the CPI-U — the Consumer Price Index for all urban consumers, not seasonally adjusted. That detail matters. Social Security's raise is built from a different index, CPI-W, and the law points the 401(k) formula at Social Security's procedures, so it is easy to assume the two use the same one. They don't: when we rebuilt the published limits for every year from 2016 to 2026, CPI-U reproduced all 33 of them (the employee limit, the total limit and the pay cap); CPI-W got four years wrong.

The rounding is why the limit moves in steps. For 2026 the unrounded figure came to $24,682 and the limit became $24,500; the last $182 waits for next year's calculation.

The thresholdWhat September has to do

July 2026 came in at 333.918 and August at 334.980. For the limit to reach $25,500, the three-month average has to be at least 1.7 times the 2005 base — 334.673. With July and August fixed, that means:

The catch-up for workers 50 and over sits on exactly the same line, because $8,500 is also 1.7 times its $5,000 base. One reading moves both.

How likely is a 0.042% rise? September has beaten that bar in 10 of the last 11 years; since 2016 the August-to-September move has ranged from +0.08% to +0.53%, usually +0.1% to +0.3%. The one miss was 2015, when collapsing oil prices pulled the index down 0.16%. That is the case worth watching this year: Brent crude has been trading around $100 a barrel, and a sharp fall in gasoline prices in September is the one plausible way the index slips below the line. Most published forecasts, including Milliman's, already assume $25,500.

Two other limits are settled no matter what September does. The total that you and your employer can put in together reaches $75,000 even if September prices fall more than 1%. And the extra catch-up for workers aged 60 to 63, created by the SECURE 2.0 Act, rises from $11,250 to $11,750: it is indexed from a 2024 base, and prices have already climbed far enough to add the first $500 step.

For your ageWhat you can put in next year

The age that counts is the one you reach by December 31, 2027: someone who turns 50 in December can make the full catch-up all year, and someone who turns 64 in 2027 drops back from the 60–63 amount to the regular catch-up.

What it's worthThe money behind a $500 step

Only a minority of savers are affected. Vanguard's How America Saves found that about 14% of the participants it serves contributed the maximum in 2024 — the share is highest in the late fifties and early sixties. If you are not near the cap, the limit is not what holds you back; the 401(k) guide covers the order that usually matters more, starting with the full employer match.

For people who do max out, the step is real money over a career:

A Roth contribution saves nothing up front but comes out untaxed in retirement; a traditional one saves the tax now and pays it later. Either way, the larger limit lets more money grow without a yearly tax bill on dividends and gains. On a modest income the same deferral can also unlock the government's new deposit from 2027 — see who qualifies for the Saver's Match.

What to do nowTwo months before payroll changes

Where these numbers come fromOur method

• Index data: Consumer Price Index for All Urban Consumers (CPI-U), U.S. city average, all items, not seasonally adjusted (BLS series CUUR0000SA0), read from the BLS API on October 11, 2026. July–September 2005 base 196.867; July–September 2001 base 177.767; July–September 2024 base 314.879.
• Law: IRC §402(g)(4) (employee limit, $500 rounding), §414(v)(2)(C) and (E) (catch-ups, including the 2024 base for ages 60–63), §415(c) and §415(d) (total limit, $1,000 rounding, July–September averages).
• Check: the same calculation reproduces every published employee, total and compensation limit from 2016 to 2026 with CPI-U; with CPI-W it misses 2017, 2020, 2023 and 2025.
• Growth figures: level end-of-year contributions at 7% nominal or 5% real a year, no fees or taxes. Real returns vary; a lower return shrinks the dollar figures but not the comparison.
• Not modeled: state taxes, plan-specific rules, the Roth catch-up wage threshold for 2027.

This post will be updated with the official figures when the IRS publishes them.

FAQFrequently asked questions

What is the 401(k) contribution limit for 2027?
Not announced yet. Based on the law and the inflation data so far, it will be $25,000 or $25,500. It is $25,500 if the September 2026 CPI-U, published October 14, is 335.122 or higher — a rise of 0.042% from August.

When will the IRS announce the 2027 401(k) limit?
Usually between late October and mid-November. The 2025 limits were announced on November 1, 2024, and the 2026 limits on November 13, 2025, in Notice 2025-67.

What is the 2027 catch-up contribution limit?
For ages 50–59 and 64 and over it will be $8,000 or $8,500, on the same September threshold as the main limit. For ages 60–63 the extra catch-up rises to $11,750 regardless of September.

Why does the 401(k) limit only go up in $500 steps?
The tax code rounds every increase down to the next multiple of $500. Inflation that does not complete a $500 step carries over to the following year's calculation.

Does the 401(k) limit include my employer's match?
No. The employee limit covers only what you contribute from your own pay. Employer contributions count toward a separate total limit, which will be $75,000 for 2027 before catch-ups.