Key Changes to IRS Retirement Plan Limits for 2025

Washington, Nov. 1, 2024 — The Internal Revenue Service has announced some significant updates to the retirement plan contribution limits for the year 2025. The new figures may impact your retirement savings strategies.

Increased Annual Contribution Limits

One of the most notable changes this year is an increase in the annual contribution limit for 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan. For 2025, the limit is now set at $23,500, up from the $23,000 seen in 2024.

This increase allows more individuals to save for retirement. However, it’s essential to consider your age and whether you participate in a qualified plan or not, as this can affect the specific amounts you can contribute.

Annual and Catch-Up Contributions

The annual contribution limit for Individual Retirement Arrangements (IRAs) remains at $7,000 for 2025. But if you’re aged 50 or over, you can take advantage of a catch-up contribution. The SECURE 2.0 Act of 2022 allows this contribution to increase with the cost of living, and in 2025, it stands at $1,000.

Individuals 50 and over also enjoy higher catch-up contributions in 401(k), 403(b), and governmental 457 plans. In 2025, this limit is $7,500, meaning they can contribute up to $31,000 in total. Additionally, individuals aged 60, 61, 62, and 63 can contribute an even higher amount of $11,250.

phase-out Ranges for IRA Contributions

The phase-out ranges for deductible contributions to traditional IRAs and eligibility to contribute to Roth IRAs have also been increased. For 2025, these ranges are:

• Single taxpayers covered by a workplace retirement plan: Between $79,000 and $89,000.
• Married couples filing jointly with a spouse covered by a workplace retirement plan: Between $126,000 and $146,000.
• Non-covered married couples and single individuals married to someone with a workplace retirement plan: Between $236,000 and $246,000.
• Married individuals filing separately: Between $0 and $10,000 (unchanged).

Saving in Roth IRAs and the Savers’ Credit

For Roth IRAs, the income limits have also been adjusted. For 2025, the income phase-out range for singles and heads of household is between $150,000 and $165,000, while for married couples filing jointly, it’s between $236,000 and $246,000.

Lastly, the income limits for the Savers’ Credit (Retirement Savings Contributions Credit) have been updated:

• Married couples filing jointly: $79,000 (up from $76,500).
• Heads of household: $59,250 (up from $57,375).
• Singles and married individuals filing separately: $39,500 (up from $38,250).

SIMPLE Retirement Account Limits

For those saving in SIMPLE retirement accounts, the annual limit for 2025 is now $16,500, up from $16,000. Individuals 50 and over can contribute a higher amount of $3,500 if they don’t participate in any applicable SIMPLE plans. However, for certain applicable SIMPLE plans, the limit is $3,850.

For employees aged 60, 61, 62, and 63 in SIMPLE plans, a higher catch-up contribution limit applies, set at $5,250.

Call to Action

Review your retirement plan

Given these new limits, it might be a good idea to review your current retirement contributions and adjust them as needed. Ensure you’re taking full advantage of the limits where appropriate. If you need help planning or understanding these contributions, consider consulting with a financial advisor.