The Internal Revenue Service (IRS) has revealed the adjusted contribution caps for 401(k) plans and various retirement accounts for the upcoming year of 2025. For 401(k)s, 403(b)s, governmental 457 plans, and the Thrift Savings Plan provided by the federal government, the employee deferral limit will see an increase to $23,500, rising from the 2024 limit of $23,000. For individuals aged 50 and above, the catch-up contribution cap will stay at $7,500, enabling them to contribute a total of $31,000 in 2025.
Beginning in 2025, there will be an additional category for catch-up contributions aimed at employees aged between 60 and 63, which will allow a higher limit of $11,250. “Retirement plans offered by employers need to be updated to accommodate this enhanced catch-up contribution,” commented Richard Pon, a certified public accountant based in San Francisco, California. Additionally, the IRS has provided updates regarding IRA contribution limits.
The annual contribution limit for IRAs remains consistent at $7,000 for the year 2025, with the catch-up contribution limit for those aged 50 and over holding steady at $1,000.
IRS announces updated retirement contribution limits
The income phase-out thresholds for deductible contributions to traditional IRAs, contributions to Roth IRAs, and the Saver’s Credit have all been raised for 2025.
For single filers covered by a workplace retirement plan, the new phase-out range is set between $79,000 and $89,000, while for married couples filing jointly, the range will be $126,000 to $146,000 if the spouse making contributions is covered by such a plan. In cases where IRA contributors are not covered by a workplace plan but are married to someone who is, the range extends from $236,000 to $246,000. The phase-out ranges for Roth IRA contributions have also been modified.
For singles and heads of households, the threshold is now $150,000 to $165,000, and for married couples filing jointly, it is $236,000 to $246,000. The parameter for married individuals filing separately remains unchanged at a range of $0 to $10,000. The income limits for the Saver’s Credit have been adjusted upwards, now set at $79,000 for married couples filing jointly, $59,250 for heads of household, and $39,500 for individual filers and married individuals filing separately.
These updates demonstrate the IRS’s commitment to adapting to inflation and enhancing retirement savings opportunities for Americans.
