401(k) Contribution Limits Increase for 2025
The IRS has announced cost-of-living adjustments (COLAs) for retirement accounts in 2025, providing higher contribution limits for many savers. Alongside these increases, new rules from the SECURE 2.0 Act will offer additional opportunities to boost retirement savings. Understanding these changes can help individuals and businesses make informed financial decisions.
Increased 401(k) Contribution Limits
Employees looking to maximize their 401(k) contributions will benefit from increased salary deferral limits in 2025. The new limits are as follows:
- 401(k), 403(b), and 457(b) Plans: The maximum employee salary deferral contribution has increased to $23,500, up from $23,000.
- Catch-Up Contributions (Age 50+): The additional contribution limit remains $7,500.
- New Catch-Up Contributions (Ages 60-63): Individuals in this age group can contribute up to $11,250, reflecting a provision in the SECURE 2.0 Act.
These changes allow employees to set aside more tax-advantaged income for retirement, making it crucial to adjust savings plans accordingly.
Adjustments for SEP and SIMPLE IRA Plans
Retirement savers using SEP and SIMPLE IRA plans will also see contribution limit increases in 2025:
- SEP IRAs: The maximum contribution will increase from $69,000 to $70,000.
- SIMPLE IRAs: Employee salary deferrals will rise from $16,000 to $16,500.
- Enhanced SIMPLE Contributions: Employees in qualifying SIMPLE plans (sponsored by companies with 25 or fewer employees) may contribute up to $17,600.
Catch-Up Contributions:
- For those 50 and older, the catch-up contribution limit remains $3,500.
- Employees in qualifying SIMPLE plans can contribute up to $3,850.
- A higher catch-up contribution limit of $5,250 applies to those aged 60 to 63.
Employers and employees participating in these plans should review these changes to maximize their retirement benefits.
IRA Contribution Limits and Phase-Out Ranges
IRA Contribution Limit
The $7,000 contribution limit remains unchanged for 2025.
Catch-Up Contributions (Age 50+)
Individuals aged 50 and over can contribute an additional $1,000, bringing their total IRA contribution to $8,000.
Roth IRA Income Phase-Out Ranges
- Single Filers: $150,000-$165,000 (up from $146,000-$161,000).
- Married Filing Jointly: $236,000-$246,000 (up from $230,000-$240,000).
Traditional IRA Deduction Phase-Outs for Active Participants
- Single Filers: $79,000-$89,000 (up from $77,000-$87,000).
- Married Filing Jointly (Covered by Employer Plan): $126,000-$146,000 (up from $123,000-$143,000).
- Married Filing Jointly (Spouse Covered by Employer Plan): $236,000-$246,000 (up from $230,000-$240,000).
Savers should consider these new thresholds when planning their 2025 retirement contributions.
Why These Increases Matter
The adjustments for 2025 provide several key benefits:
- More Tax-Advantaged Savings: Higher limits enable greater pre-tax or tax-free savings, reducing taxable income.
- More Options for Older Savers: The SECURE 2.0 Act creates additional opportunities for individuals aged 60-63 to contribute more during peak earning years.
- Expanded Employer Contribution Options: Employers can contribute more to SEP and SIMPLE IRAs, helping employees build stronger retirement funds.
With these changes, individuals should review their retirement strategies to ensure they are taking full advantage of the available contributions.
Work with a Certified Financial Planner
Maximizing retirement savings requires a strategy tailored to individual financial goals. A Certified Financial Planner (CFP) can help assess contribution strategies, minimize tax liabilities, and ensure retirement accounts are structured for long-term success. Seeking professional guidance can provide clarity on investment decisions and ensure compliance with the latest IRS regulations.
FAQ's: 401(k) Contribution Limits for 2025
What is the maximum 401(k) contribution limit for 2025?
The maximum employee salary deferral contribution for 401(k), 403(b), and 457(b) plans has increased to $23,500.
Are catch-up contributions changing in 2025?
For those 50 and older, the catch-up contribution limit remains $7,500. A new higher limit of $11,250 applies to individuals aged 60 to 63.
Has the IRA contribution limit changed for 2025?
The IRA contribution limit remains at $7,000, with an $8,000 contribution limit for those 50 and older.
How do these changes affect Roth IRA contributions?
The income phase-out range for single filers is now $150,000-$165,000, and for married couples filing jointly, it is $236,000-$246,000.
What are the new limits for SIMPLE IRAs?
The new SIMPLE IRA employee salary deferral limit is $16,500, with $17,600 available for qualifying plans. The catch-up contribution for those 50 and older is $3,500, with higher limits for certain plans.
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.