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The IRS recently announced adjusted contribution limits for retirement accounts in 2025, addressing inflation’s impact on retirement savings. These adjustments, outlined in Notice 2024-80, affect a range of retirement plans, including 401(k) plans, 403(b) plans, individual retirement arrangements (IRAs), and the federal government’s Thrift Savings Plan (TSP).
401(k) and Similar Plans See Increased Contribution Limit
Starting in 2025, individuals can contribute up to $23,500 to their 401(k) plans, a $500 increase from the 2024 limit. This increased limit also applies to similar retirement plans, including 403(b) and 457 plans, as well as the TSP. While it may seem like a modest increase, these adjustments are designed to help individuals keep pace with rising costs and build more robust retirement funds over time.
IRA Contribution Limits and Catch-Up Contributions Remain Unchanged
For traditional and Roth IRAs, the annual contribution limit stays steady at $7,000 for 2025, with a catch-up contribution of $1,000 available for individuals aged 50 and older. This means those eligible for the catch-up provision can contribute a total of $8,000 to their IRAs. While IRA limits did not increase, they still provide a valuable tax-advantaged way to build retirement savings alongside employer-sponsored plans.
Enhanced Catch-Up Contribution for Ages 50+ and New Tier for Ages 60-63
Individuals aged 50 and older who participate in 401(k), 403(b), and other similar plans can contribute an additional $7,500 as a catch-up amount, bringing their total potential contribution to $31,000 in 2025. In addition, under the SECURE 2.0 Act, a new, higher catch-up contribution of $11,250 is available for those aged 60 to 63. This provision, designed to assist those approaching retirement, allows them to accelerate their retirement savings during critical years.
Income Limits Adjusted for IRA Deductibility, Roth IRA Eligibility, and Saver’s Credit
The income ranges for determining eligibility for tax-deductible contributions to traditional IRAs, contributions to Roth IRAs, and the saver’s credit have all increased for 2025.
- Roth IRA Eligibility: Single filers and heads of households can now contribute to a Roth IRA if their income falls between $150,000 and $165,000, up from $146,000 to $161,000. For married couples filing jointly, the range increases to between $236,000 and $246,000.
- Saver’s Credit: Designed for low- and moderate-income taxpayers, the income limit for the saver’s credit now stands at $79,000 (for married couples filing jointly) which is up from $76,500. For heads of household, the limit is $59,250, while singles and married individuals filing separately have a limit of $39,500.
These adjustments, though gradual, are essential steps in supporting individuals’ ability to save for retirement, helping them offset inflation and maintain their financial security in the years to come.
Corporate Capital, Inc.
Do you need assistance with your tax filings as we head into 2025? Our Corporate Capital team is here for you. Located in Las Vegas, Nevada, our seasoned team of licensed professionals and legal experts can guide you through a successful tax filing season. We welcome you to call 855-371-0070 to speak to a knowledgeable team member!
Source Article:
https://www.journalofaccountancy.com/news/2024/nov/inflation-adjustments-to-retirement-account-limits-issued-for-2024.html Inflation adjustments to retirement account limits issued for 2024. By Martha Waggoner November 1, 2024.