2025 401(k) Contribution Limits: What Savers Need to Know

As we head into 2025, the IRS has announced new contribution limits for 401(k) plans, reflecting adjustments designed to help workers keep pace with inflation and boost retirement savings. These changes are crucial for individuals seeking to maximize their retirement contributions and take advantage of tax-deferral benefits. Here’s a breakdown of the new 401(k) contribution limits for 2025, along with some key insights for retirement savers.

 

401(k) Contribution Limits

  • Regular Contributions: 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 for 2025, up from $23,000 in 2024.
  • Catch-Up Contributions: For employees aged 50 and older, the catch-up contribution limit remains at $7,500, making the total contribution cap $31,000 for those eligible.
  • Higher Catch-Up Contributions: Under the SECURE 2.0 Act, employees aged 60, 61, 62, or 63 can now make catch-up contributions of up to $11,250, instead of the previous $7,500.

IRA Contribution Limits

  • Regular Contributions: The limit for contributions to traditional and Roth IRAs remains at $7,000 for 2025, the same as in 2024.
  • Catch-Up Contributions: Individuals aged 50 and older can make an additional catch-up contribution of $1,000, bringing the total IRA contribution limit to $8,000.

Income Phase-Out Ranges

  • Traditional IRA: For single taxpayers covered by a workplace retirement plan, the phase-out range for deductible contributions has increased to $79,000 to $89,000.
  • Roth IRA: The income phase-out range for Roth IRA contributions for single taxpayers has increased to $150,000 to $165,000.

Combined Employee and Employer Contributions

  • The limit on combined employee and employer contributions to a 401(k) plan has increased to $70,000 for 2025, up from $69,000 in 2024.

Why It Matters

Maximizing your contributions to retirement accounts can significantly impact your financial security in retirement. The higher limits for 2025 provide an opportunity to save more, especially for those nearing retirement age. It’s also a good idea to take advantage of employer matching contributions, if available, as this can further boost your retirement savings.

Planning Ahead

Consider discussing your retirement savings strategy with a financial advisor to ensure you’re making the most of these updated limits. Setting up automatic contributions can help you stay on track with your retirement goals.

By staying informed and planning strategically, you can make the most of the new 401(k) limits and secure a comfortable retirement.