The Internal Revenue Service (IRS) has announced that contribution limits for 401(k) plans will increase in 2025. Employees can contribute up to $23,500 to their 401(k) plans next year, a $500 increase from the 2024 limit. Workers aged 50 and older can make catch-up contributions of up to $7,500, allowing them to contribute a total of $31,000 to their 401(k) plans in 2025.
The SECURE 2.0 Act of 2022 introduces an even higher catch-up provision for individuals aged 60 to 63, allowing them to contribute up to $11,250 in catch-up funds. While 401(k) contribution limits will increase, the IRS did not raise the annual contribution limit for Individual Retirement Accounts (IRAs), which will remain at $7,000 in 2025. The catch-up contribution for IRAs will also stay the same, allowing people aged 50 and over to contribute an additional $1,000 per year.
Irs raises 401(k) limits
In 2025, the income phaseout ranges for IRA deductions will increase to reflect cost-of-living changes. Single taxpayers covered by a workplace retirement plan can deduct IRA contributions up to an income of $89,000, while married couples filing jointly face a phaseout range of $126,000 to $146,000.
The IRS has also increased the standard deduction. Single taxpayers and married individuals filing separately can now deduct $15,000 in 2025, up from $14,600 in 2024. Married couples filing jointly will see their standard deduction rise to $30,000, while heads of households receive an increase to $22,500.
These annual adjustments are part of the IRS’s efforts to help Americans manage and maintain their retirement savings. The new limits reflect the rising cost of living and provide workers with more flexibility in building their retirement savings while encouraging older workers to save more as they near retirement.
