There is some good news for retirement savers! The IRS has released the cost-of-living adjustments (COLAs) for retirement accounts for 2025, and many of the dollar limit restrictions on retirement accounts will increase next year. In addition, new rules from the SECURE 2.0 Act also will bring more savings opportunities.
401(k) Plans
For savers looking to max out 401(k) contributions, higher contribution limits will be available for 2025. The salary deferral limit for employees who participate in 401(k) plans, including the Thrift Savings Plan, as well as 403(b) and 457(b) plans, is increased to $23,500, up from $23,000.
The catch-up contribution limit for those age 50 or over remains unchanged at $7,500. Under a change made in the SECURE 2.0 Act, a higher catch-up contribution limit applies starting in 2025 for individuals aged 60, 61, 62 and 63. This higher catch-up contribution limit is $11,250, instead of $7,500.
SEP and SIMPLE IRA Plans
The maximum SEP contribution will increase from $69,000 to $70,000. The cap on compensation that can be taken into account for calculating SEP and other retirement plan contributions is increased from $345,000 to $350,000.
SIMPLE salary deferral contributions will increase as well, going from $16,000 to $16,500 for 2025. The SECURE 2.0 Act allows individuals in certain SIMPLE plans, including those sponsored by companies with 25 or fewer employees, to contribute a higher amount. For 2025, this higher amount remains $17,600.
The catch-up contribution limit that applies for individuals aged 50 and over who participate in a SIMPLE plan remains $3,500 for 2025. Under a change made in the SECURE 2.0 Act, a higher catch-up limit applies for employees aged 50 and over who participate in certain SIMPLE plans, including those sponsored by companies with 25 or fewer employees. For 2025, this limit remains $3,850. Under another change from the SECURE 2.0 Act, an even higher catch-up contribution limit applies starting in 2025 for employees aged 60, 61, 62 and 63. This higher catch-up contribution limit is $5,250.
IRA Contributions
The IRA contribution limit will remain at $7,000 for 2025. The $1,000 IRA catch- up contribution is now indexed for inflation but remains unchanged for 2025. This will again allow those who are aged 50 or over to again contribute $8,000 to an IRA for 2025. The phase-out range for savers making contributions to a Roth IRA is increased to $150,000-$165,000 for single filers, up from $146,000-$161,000. For those who are married filing jointly, the income phase-out range is increased to $236,000-$246,000, up from $230,000-$240,000.
Phaseout ranges for active participants in employer plans looking to make deductible traditional IRA contributions have also been increased. For single individuals covered by an employer retirement plan, the phase-out range is $79,000-$89,000 for 2025, up from $77,000-$87,000. For married couples filing jointly, if the spouse making the IRA contribution is covered by an employer retirement plan, the phase-out range is increased to $126,000- $146,000, up from $123,000-$143,000. For those not covered by an employer retirement plan but are married to someone who is covered, the phase-out range is increased to $236,000-$246,000, up from $230,000-$240,000.
More details on the COLAs for 2025 can be found at https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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