The Internal Revenue Service (IRS) will soon update the 401(k) limit. As a matter of fact, it will increase to $23,500 for 2025. However, if you have an IRA account, the limit remains $7,000.
Bear in mind that the contribution limit the IRS set for a 401(k) savings account was $23,000 for 2024. Therefore, the boost will not be a significant one since it will only increase by 500 dollars.
IRS highlight of changes for 2025
Not only will the IRS change the 401(k) contribution limit for 2025, but there are also other important updates taxpayers should take into account. For example, the annual contribution limit for employees who take part in 403(b), the federal government’s Thrift Savings Plan and the governmental 457 plans will increase to $23,500, just like 401(k).
50-year-olds and older may be eager to know the catch-up contribution limit for 2025 if they have a 401(k). Unfortunately, it remains the same, so it will be $7,500 in 2025 too for:
- 401(k)
- 403(b)
- gov. 457 plans
- Fed Thrift Savings plans
Hence, 50-year-olds and older can contribute up to $31,000 per year.
IRS unveils higher catch-up contribution limit for employees 60-63
Good news for those employees aged 60, 61, 62, and 63 who take part in 401(k), 403(b), gov. 457 plans and Fed Thrift Savings plans. They will have higher catch-up contribution limit of $11,250.
IRS Announces 2025 Tax Bracket Changes: Here’s How Thousands of Americans Will Pay Less
For your information, it is just $7,500 in 2024. Thus, those aged 60-63 who qualify and have enough money will be able to contribute $3,750 more than in 2024. No doubt, it will come in handy once you are enjoying retirement.
If you have an IRA account, and you are 50 years old or older, your IRA catch-up contribution limit for individuals will remain $1,000 for 2025 too. Another interesting thing about IRA is the following thing.
The IRS announced that the income ranges for determining if you are eligible or not to make deductible contributions to traditional IRAs, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for next year.