On November 1, 2024, the Internal Revenue Service (IRS) announced several updates regarding retirement contributions for 2025. Key changes include an increase in the annual contribution limit for 401(k) plans and other similar retirement accounts.
Contribution Limits for 2025
- 401(k) Plans: The contribution limit for employees participating in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is set to increase to $23,500, up from $23,000 in 2024.
- IRAs: The limit for annual contributions to an Individual Retirement Account (IRA) remains at $7,000. For those aged 50 and over, the catch-up contribution limit stays at $1,000 for 2025.
- Catch-Up Contributions: Employees aged 50 and over in most 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan can contribute up to $31,000 in total for 2025, which includes the catch-up contribution of $7,500. Notably, under SECURE 2.0, employees aged 60 to 63 in these plans have a higher catch-up limit of $11,250.
- SIMPLE Retirement Accounts: For SIMPLE accounts, the contribution limit will rise to $16,500, up from $16,000. Additionally, individuals can contribute $17,600 to certain applicable SIMPLE accounts, with the catch-up limit for those aged 50 and over remaining at $3,500. For specific SIMPLE plans, the catch-up limit for this age group will be $3,850, and for employees aged 60 to 63, it will be $5,250.
IRA Deduction Phase-Out Ranges
The IRS has also updated the income ranges that determine eligibility for deductible contributions to traditional IRAs, contributions to Roth IRAs, and the Saver’s Credit:
- Traditional IRAs:
- Single taxpayers: Phase-out range increases to $79,000 – $89,000.
- Married filing jointly: Phase-out range increases to $126,000 – $146,000.
- Non-covered spouse: Phase-out range increases to $236,000 – $246,000.
- Married filing separately: Range remains $0 – $10,000.
- Roth IRAs:
- Single and heads of household: Phase-out range increases to $150,000 – $165,000.
- Married filing jointly: Phase-out range increases to $236,000 – $246,000.
- Married filing separately: Range remains $0 – $10,000.
- Saver’s Credit:
- For married couples filing jointly, the income limit rises to $79,000 (up from $76,500).
- For heads of household, the limit increases to $59,250 (up from $57,375).
- For singles and married individuals filing separately, it rises to $39,500 (up from $38,250).
Additional Guidance
For a complete overview of all cost-of-living adjustments for 2025 affecting pension plans and retirement accounts, refer to Notice 2024-80 available on IRS.gov.
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