It's that time of year again when the IRS rolls out updates for retirement savings, and for 2025, there are some notable changes to keep an eye on, especially for your 401(k).
For starters, the amount you can contribute to your 401(k) plan is getting a bump. Starting in 2025, the annual contribution limit for employees will rise to $23,500, up from $23,000 in 2024. This applies to various workplace retirement plans, including 401(k)s, 403(b)s, government 457 plans, and the federal government's Thrift Savings Plan.
Now, if you're 50 or older, you're likely familiar with the 'catch-up' contribution. This allows you to contribute a bit more to your retirement savings. For 2025, this catch-up contribution limit remains at $7,500. So, if you're 50 or over, you can contribute a total of $31,000 to your 401(k) in 2025 ($23,500 standard + $7,500 catch-up).
But here's an interesting twist for those in their early sixties: thanks to the SECURE 2.0 Act, there's an even higher catch-up contribution limit for employees aged 60, 61, 62, and 63. For 2025, this special limit is $11,250. This means individuals in this age bracket could potentially contribute up to $34,750 ($23,500 + $11,250) to their 401(k) plans.
It's also worth remembering that these limits are for your elective deferrals and any contributions made to a designated Roth account within your 401(k). If you have multiple 401(k) accounts, your total contributions across all of them can't exceed these limits.
What about IRAs? Well, the annual contribution limit for Individual Retirement Arrangements (IRAs) is holding steady at $7,000 for 2025. The catch-up contribution for those 50 and over for IRAs also remains at $1,000, bringing the total potential IRA contribution to $8,000.
Beyond the basic contribution limits, there are also overall limits on total employer and employee contributions. For 2025, this combined limit is $70,000. If you're 50 or older, this limit increases to $77,500, which includes the $7,500 catch-up contribution.
It's always a good idea to stay on top of these numbers. Understanding these limits helps you maximize your retirement savings and take full advantage of the tax benefits these plans offer. And remember, if your employer offers matching contributions, that's essentially free money towards your retirement, on top of your own contributions!
