Retirement account limits will increase in 2025

The Internal Revenue Service (IRS) has announced that employees can contribute up to $23,500 to their 401(k) plans in 2025, an increase from the previous limit of $23,000 in 2024.

At the same time, the IRS has issued technical guidance on all cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for the 2025 tax year, as detailed in Notice 2024-80, available on IRS.gov.

Key Changes for 2025 include:

• The annual contribution limit for employees participating in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan has increased to $23,500 from $23,000.

• The annual contribution limit for Individual Retirement Accounts (IRAs) remains at $7,000. The catch-up contribution limit for individuals aged 50 and over, as amended by the SECURE 2.0 Act of 2022, remains at $1,000 for 2025.

• The catch-up contribution limit for employees aged 50 and over participating in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan remains $7,500 for 2025. Thus, participants aged 50 and older can contribute up to $31,000 annually starting in 2025. A higher catch-up contribution limit of $11,250 applies for employees aged 60 to 63.

• The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver’s Credit have all increased for 2025.

Phase-out ranges

For single taxpayers covered by a workplace retirement plan, the phase-out range is $79,000 to $89,000, up from $77,000 to $87,000. For married couples filing jointly, where the contributing spouse is covered by a workplace retirement plan, the phase-out range is $126,000 to $146,000, up from $123,000 to $143,000.

For an IRA contributor not covered by a workplace retirement plan but married to someone who is, the phase-out range is $236,000 to $246,000, up from $230,000 to $240,000.

For married individuals filing separately and covered by a workplace retirement plan, the phase-out range remains $0 to $10,000.

The income phase-out range for Roth IRA contributions is $150,000 to $165,000 for singles and heads of household, up from $146,000 to $161,000. For married couples filing jointly, it is $236,000 to $246,000, up from $230,000 to $240,000. For married individuals filing separately, the range remains $0 to $10,000.

Saver’s Credit

The income limit for the Saver’s Credit is $79,000 for married couples filing jointly, $59,250 for heads of household, and $39,500 for singles and married individuals filing separately.

The contribution limit for SIMPLE retirement accounts increases to $16,500 from $16,000. Under SECURE 2.0, certain SIMPLE accounts allow for a higher contribution limit of $17,600 for 2025.

The catch-up contribution limit for employees aged 50 and over participating in most SIMPLE plans remains $3,500 for 2025. For certain SIMPLE plans, a different catch-up limit of $3,850 applies. A higher catch-up contribution limit of $5,250 is available for employees aged 60 to 63.

The IRS said the adjustments reflect the agency’s response to inflation and aim to enhance retirement savings opportunities for individuals across various plans.