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In 2025, the IRS announced some key changes to the contribution limits for retirement savings plans like 401(k)s, IRAs, and SIMPLE retirement accounts. These adjustments are part of the government’s efforts to help workers save more for retirement, with some significant increases and specific rules to consider. Here’s a breakdown of the updated contribution limits, eligibility criteria, and other essential information.

1401(k) Contribution Limit Increases to $23,500 for 2025

The contribution limit for 401(k) plans in 2025 has been increased to $23,500, up from $23,000 in 2024. This change means that employees can contribute more of their earnings to their 401(k) plans, allowing for greater retirement savings potential. The increase applies to 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan.

Additionally, the catch-up contribution limit for individuals aged 50 and older remains at $7,500, bringing the total possible contribution for eligible participants to $31,000 for 2025. This change helps those closer to retirement age maximize their savings.

IRA Contribution Limit Remains at $7,000

For Individual Retirement Accounts (IRAs), the contribution limit remains $7,000 for 2025. This limit applies to both Traditional and Roth IRAs. However, for individuals aged 50 and above, the catch-up contribution remains at $1,000, bringing the total allowable contribution to $8,000 for eligible participants. This provides individuals nearing retirement an opportunity to save more in their IRAs.

Catch-up Contribution Changes for Older Workers

The catch-up contribution limits for employees over the age of 50 have also been adjusted under the SECURE 2.0 Act.

For 401(k), 403(b), 457 plans, and Thrift Savings Plans, employees aged 60 to 63 will see a higher catch-up contribution limit of $11,250 for 2025, compared to the standard $7,500 catch-up.
This increase provides a significant advantage to older workers, enabling them to save more as they approach retirement.

IRA Deduction Phase-out Ranges for 2025

The income ranges for determining eligibility to deduct contributions to a Traditional IRA have been updated for 2025:

Single taxpayers covered by a workplace retirement plan now have a phase-out range of $79,000 to $89,000, up from $77,000 to $87,000 in 2024.
Married couples filing jointly, with one spouse covered by a workplace plan, now have a phase-out range of $126,000 to $146,000, up from $123,000 to $143,000 in 2024.
The phase-out range for Roth IRAs has also increased. For singles, it’s now between $150,000 and $165,000, and for married couples, it’s between $236,000 and $246,000.
These changes reflect the government’s adjustments for inflation, allowing more individuals to benefit from retirement savings tax deductions.

Saver’s Credit Income Eligibility Rises

The Saver’s Credit helps low- and moderate-income workers receive a tax credit for contributing to retirement savings. The income eligibility for this credit has been increased in 2025:

Married couples filing jointly can now claim the credit if their income is $79,000 or less (up from $76,500 in 2024).
Heads of household can qualify with an income of $59,250 or less (up from $57,375).
Single filers and married individuals filing separately can claim the credit if their income is $39,500 or less (up from $38,250).
This increase makes it easier for more individuals to take advantage of the Saver’s Credit and reduce their tax burden while saving for retirement.

Changes to SIMPLE Retirement Accounts

SIMPLE retirement accounts have also seen an increase in contribution limits. The standard contribution limit for SIMPLE IRAs is now $16,500 for 2025, up from $16,000 in 2024. Additionally, the catch-up contribution limit for those aged 50 and older remains $3,500, but for certain SIMPLE plans, it may go as high as $5,250 for participants aged 60-63.

These updates provide a valuable opportunity for small business employees to save more for retirement, with higher contribution limits for those closer to retirement age.

Conclusion

The IRS updates for 2025 bring significant changes to contribution limits for 401(k) plans, IRAs, and SIMPLE retirement accounts. With increased limits and catch-up contributions, workers—especially those nearing retirement—will have more opportunities to save for their future. It’s important to stay informed about these changes, so you can take full advantage of your retirement savings options and maximize your financial security in the years to come.

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