CNN: As 2025 approaches, the IRS has updated the contribution limits for 401(k)s and other retirement plans, with significant changes aimed especially at older workers in their early 60s.
- New Contribution Limits: The general contribution limit for 401(k)s and similar plans will increase to $23,500, up from $23,000.
- Catch-Up Contribution Stays: The catch-up contribution limit for those 50 and older remains unchanged at $7,500.
- Special Provision for Ages 60-63: A new provision allows increased catch-up contributions of $11,250 for those aged 60 to 63, raising their total possible contribution to $34,750.
- Reality of Contributions: Despite the increased limits, historical data, such as Vanguard’s 2024 report, shows that only 14% of participants max out their 401(k) contributions, typically those with higher incomes and longer tenures.
- IRA Contribution and Income Thresholds: The IRA contribution limit remains at $7,000, with the catch-up amount at $1,000. However, income thresholds for tax-advantaged contributions to IRAs have increased.
- Roth IRA Adjustments: The income limit for single filers contributing to a Roth IRA rises to $165,000 from $161,000; for married couples filing jointly, it goes up to $246,000 from $240,000.
- Traditional IRA Adjustments: For single filers covered by a workplace plan, the AGI limit is now $89,000, up from $87,000. For married filers where the individual is covered, it’s $146,000, up from $143,000.
- Saver’s Credit Update: Income thresholds for the Saver’s Credit have also increased, now at $39,500 for singles, $59,250 for heads of households, and $79,000 for married couples filing jointly.
The 2025 adjustments in retirement savings limits reflect ongoing efforts to aid Americans in securing a financially stable retirement, especially given the persistent challenges of housing affordability and other economic pressures. While these changes benefit those who can afford to save more, broader systemic reforms may still be necessary to address the needs of all workers.
