Retirement Account Contribution Limits for 2025
By: Matt Rose, CFP®, Financial Advisor / Retirement Plan Consultant
As the cost of living continues to rise, planning for retirement remains a top priority for many Americans. One of the key components in securing a comfortable retirement is maximizing contributions to retirement accounts such as Individual Retirement Accounts (IRAs) and employer-sponsored 401(k) plans. For 2025, the IRS has set new contribution limits for these retirement savings vehicles, allowing individuals to put away more money for the future.
For IRAs, the contribution limit for 2025 will mirror 2024’s limit of $7,000. This limit applies to both Traditional IRAs and Roth IRAs, though eligibility for Roth IRA contributions phases out at higher income levels. Additionally, individuals aged 50 and older can take advantage of “catch-up” contributions, allowing them to contribute an additional $1,000, bringing their total annual IRA contribution limit to $8,000. This extra contribution is designed to help those closer to retirement save more as they approach their retirement age.
The contribution limits for 401(k) plans are seeing an increase in 2025. The new limit for employee contributions will rise to $23,500, up from $23,000 in 2024. This increase is also a response to inflation, helping workers build their retirement savings more effectively. For calendar year 2025, individuals who are 50 or older can make an additional $7,500 catch-up contribution, bringing their total contribution limit to $31,000 ($23,500 deferral limit plus $7,500 catch-up). Starting in 2025, the SECURE 2.0 Act allows individuals between the ages of 60 and 63 to contribute more than the usual catch-up amount for a total catch-up of $11,250, bringing their total contribution limit to $34,750 ($23,500 deferral limit plus $11,250 catch-up). However, to be eligible for the $11,250 catch-up contribution, you must be age 60, 61, 62 or 63 at the end of the calendar year.1
Saving for retirement is one of the most important financial decisions individuals can make as it provides security and peace of mind in later years. A crucial part of this planning is understanding and utilizing the IRS contribution limits for retirement accounts each year. By staying informed about these limits, individuals can take full advantage of tax-advantaged accounts like IRAs and 401(k)s, helping to maximize their savings potential. Regularly reviewing these limits ensures that you are contributing the maximum allowable amount to your retirement funds, which can significantly impact your financial security when you reach retirement age. Being proactive and strategic about retirement savings today can lead to a more comfortable and stress-free future.
[1] https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000
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