The IRS has announced updates to retirement contribution limits for 2025. While the 401(k) limit will see a modest increase, other savings plans and catch-up contributions are also getting notable adjustments. These updates aim to help Americans boost their retirement savings. Let’s cut into what’s changing and what it means for your financial plans.
Contribution
For 2025, the contribution limit for 401(k) accounts will increase from $23,000 in 2024 to $23,500. Though the $500 boost isn’t significant, it’s a small step forward for those maximizing their retirement savings.
This change also applies to similar retirement plans, such as:
- 403(b) plans
- Governmental 457 plans
- Federal Thrift Savings Plans (TSP)
The uniform limit ensures employees across various sectors can contribute the same maximum amount to these tax-advantaged accounts.
Catch-Up
If you’re 50 or older, you’re likely familiar with the concept of catch-up contributions, which allow older workers to save more for retirement. However, for most plans—including 401(k), 403(b), 457 plans, and TSP—the 2025 catch-up contribution limit remains unchanged at $7,500.
This means eligible individuals aged 50 and older can contribute up to $31,000 annually when combining their standard and catch-up limits.
Here’s how that looks:
| Age Group | Plan Type | 2025 Limit |
|---|---|---|
| Under 50 | 401(k), 403(b), TSP | $23,500 |
| 50 and Older | 401(k), 403(b), TSP | $31,000 |
Higher Catch-Up
Great news for employees aged 60–63! The IRS has unveiled a special catch-up contribution limit of $11,250 for this age group starting in 2025.
This is a significant increase from the $7,500 limit in 2024, allowing these individuals to contribute $3,750 more annually. This higher limit is intended to help those nearing retirement accelerate their savings.
For example, someone aged 60–63 participating in a 401(k) plan can contribute up to $34,750 in 2025, including standard and catch-up contributions.
IRA Updates
The IRS has kept the Individual Retirement Account (IRA) contribution limit at $7,000 for 2025. While this limit remains unchanged, there are updates to note:
- IRA catch-up contributions for individuals 50 and older stay at $1,000.
- Income ranges for determining eligibility to make deductible contributions to traditional IRAs or contribute to Roth IRAs have increased. This adjustment provides more individuals with the opportunity to save on a tax-advantaged basis.
These changes can make IRAs more accessible, even if the primary contribution limits are static.
Changes Matter
Even incremental increases in contribution limits can significantly impact long-term retirement savings, especially with compounding interest. The enhanced limits for individuals aged 60–63 recognize the need to give those nearing retirement a chance to make up for lost time.
Whether you’re working towards maximizing your 401(k), looking into IRA options, or planning for retirement, these updates from the IRS are worth noting.
FAQs
What is the 401(k) limit for 2025?
The 401(k) limit for 2025 is $23,500.
Has the IRA contribution limit changed?
No, it remains $7,000 for 2025.
What is the catch-up limit for those 50+?
It is $7,500 for most plans in 2025.
Who gets the $11,250 catch-up limit?
Employees aged 60–63 with eligible plans.
Are income limits for IRAs increasing?
Yes, income ranges for IRA eligibility have increased.
