MW The IRS just set 401(k) limits for 2025 - here's how much you can save

Andrew Keshner

Older workers will soon be able save thousands of dollars more per year

The Internal Revenue Service said Friday that 401(k) contribution limits will climb to $23,500 next year, meaning retirement savers will be able to tuck away a little more in 2025.

The $23,500 limit is a $500 increase from this year's limits. The same limit applies to people saving for retirement in 403(b) plans, government 457 plans and the federal government's Thrift Savings Plan.

While the 401(k) contribution limit is edging higher, the IRA contribution cap is staying at $7,000. The catch-up amount for IRA savers over age 50 stays at $1,000. The catch-up provision for 401(k)s and other employer-sponsored plans is climbing to $11,250 from $7,500 for workers who are ages 60 to 63.

The IRS sets its retirement contribution amounts each year, after accounting for inflation. There are upward adjustments to the income ranges for claiming the saver's credit. There are also new higher income limits that pertain to traditional IRA contributions in certain circumstances and Roth IRAs.

Friday's news follows the tax agency's late-October announcement of the 2025 tax brackets and standard-deduction amount. There, taxpayers will see a roughly 2.8% increase year over year.

While little is changing for the traditional, pretax IRA, people with aftertax Roth IRAs should take note. The income phase-out range when a household becomes ineligible for Roth IRA contributions climbs to $150,000 to $165,000 for individuals. The 2025 income phase-out range for a married couple filing jointly is between $236,000 and $246,000 next year.

Higher contribution amounts may be a great way to build up a nest egg, but many Americans don't come close to reaching those limits. Only 14% of households maxed out their contributions in 2023, and over half of those big savers made at least $150,000 a year, according to a Vanguard report. In 2023, the uppermost limit was $22,500.

-Andrew Keshner

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November 01, 2024 13:24 ET (17:24 GMT)

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