The Internal Revenue Service (IRS) announced an increase in the contribution limit for 401(k) plans in 2025. Individuals can now contribute up to $23,500, up from $23,000 in 2024. Additionally, the IRS has issued updated cost-of-living adjustments affecting various retirement accounts and tax-related items for the upcoming tax year, detailed in Notice 2024-80.
Key Highlights for 2025:
401(k) and Other Employer-Sponsored Plans
- The maximum contribution limit for 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan is raised to $23,500.
- The catch-up contribution limit for employees aged 50 and over remains $7,500, allowing those eligible to contribute up to $31,000 in total for 2025.
- For employees aged 60-63, a higher catch-up limit of $11,250 applies, as established by the SECURE 2.0 Act of 2022.
Individual Retirement Accounts (IRAs)
- The IRA contribution limit remains at $7,000 for 2025, with a catch-up contribution limit of $1,000 for individuals aged 50 and over.
Income Phase-Outs for IRA and Roth IRA Contributions
- Traditional IRA:
- Single taxpayers with workplace retirement plans face a phase-out range between $79,000 and $89,000, up from $77,000 to $87,000.
- For married couples filing jointly, the phase-out range is $126,000 to $146,000 if the contributing spouse is covered by a workplace plan, up from $123,000 to $143,000.
- For IRA contributors married to a covered spouse, the phase-out range is $236,000 to $246,000, up from $230,000 to $240,000.
- Roth IRA:
- Single filers and heads of household have a phase-out range of $150,000 to $165,000, up from $146,000 to $161,000.
- For married couples filing jointly, the range is $236,000 to $246,000, up from $230,000 to $240,000.
Saver’s Credit (Retirement Savings Contributions Credit)
- The income limits for claiming the Saver’s Credit increased to $79,000 for married couples filing jointly (up from $76,500), $59,250 for heads of household (up from $57,375), and $39,500 for singles and married individuals filing separately (up from $38,250).
SIMPLE Retirement Accounts
- The contribution limit for SIMPLE retirement accounts is increased to $16,500 from $16,000.
- For certain SIMPLE accounts, a higher contribution limit of $17,600 remains in effect, per SECURE 2.0 guidelines.
- The catch-up contribution limit for employees aged 50 and over in SIMPLE plans remains $3,500, with a higher limit of $3,850 for applicable accounts. For employees aged 60-63, the catch-up limit is $5,250.
Full details on these retirement-related adjustments for tax year 2025 are available in Notice 2024-80.
