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The Internal Revenue Service (IRS) has announced an increase in the contribution limit for 401(k) plans in 2025. The new limit is set at $23,500, up from $23,000 in 2024. This change applies to 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan. The announcement was made in a technical guidance issued by the IRS regarding all cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2025.
The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $7,000. The catch-up contribution limit for individuals aged 50 and over also remains at $1,000 for 2025. However, the catch-up contribution limit for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan remains $7,500 for 2025. This means that participants in these plans who are 50 and older can contribute up to $31,000 each year starting in 2025.
Under a change made in the SECURE 2.0 Act of 2022, a higher catch-up contribution limit applies for employees aged 60, 61, 62, and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500. This allows individuals in this age range to contribute a maximum of $34,750 in 2025.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit have all increased for 2025. According to the IRS, taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If, during the year, either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income.