IRS 401(k) Contribution Limits for 2025 Have a ‘Super’ Twist News ad

We research all brands listed and may receive compensation from our affiliates. Research and financial considerations may influence how brands are presented. Not all brands are included. Find out more.

If you’ve maxed out your 401(k) retirement account or are thinking about starting, here’s some good news: The contribution limit will increase by $500 next year.

In 2025, you’ll be able to contribute $23,500 to your 401(k) retirement account, not counting any matching from your employer, the IRS announced Friday.

Adults ages 50 to 59 can also make 401(k) “catch-up” contributions of up to $7,500, meaning their total contribution limit will be $31,000 next year.

From next year, people aged 60 to 63 years will be able to earn extra money. additional contributions to their 401(k) plans for the first time thanks to the SECURE 2.0 Act. Their “super” catch-up contribution limit is $11,250, which means they can max out their 401(k) with $34,750 in 2025. Wall Street Journal calls it “the biggest change to 401(k) contribution rules in two decades.”

Advertising money. We may receive compensation if you click on this ad.AnnouncementMoney Advertising Disclaimer

401(k) contribution limit for 2025

A 401(k) is an employer-sponsored plan that allows employees to contribute a portion of their income to a tax-advantaged account. You contribute pre-tax dollars, which reduces your taxable income for that year, and you typically don’t pay any taxes until you access the funds in retirement. This tax deferral is usually beneficial because there is a good chance that when you stop working, you will be in a lower tax bracket.

This year the limit is $23,000, and there is still time to potentially make a plan to reach that maximum since the contribution deadline is December 31st.

Why is the IRS increasing the 401(k) contribution limit for 2025? This is simply an adjustment for inflation. The contribution limit is increased annually as needed.

In addition to 401(k)s, the $23,500 annual limit will also apply to 403(b)s, most 457 plans and the Federal Thrift Savings Plan.

IRA contribution limit for 2025

The $7,000 individual retirement account (IRA) limit will not change in 2025 because inflation has not been high enough to justify it. People age 50 and older can also make additional IRA contributions, but the limit will remain at $1,000.

However, by 2025, income limits to qualify for tax-free IRA contributions and Roth IRA contributions will increase.

Advertising money. We may receive compensation if you click on this ad.AnnouncementMoney Advertising Disclaimer

More money:

Top 5 Companies for Tax Benefits 2024

Tax Rates for 2025: IRS Increases Income Thresholds and Standard Deductions

Don’t Make This Costly 401(k) Mistake When Changing Jobs

Leave a Comment