Contribution Limits for 401(k)s Will Have a 'Super' Twist Next Year
If you max out your 401(k) retirement account or you're thinking about starting, here's some good news: The contribution limit will increase by $500 next year.
In 2025, you will be able to put $23,500 in your 401(k), not including any match from your employer, the IRS announced Friday.
Adults ages 50 to 59 can also make "catch-up" 401(k) contributions of up to $7,500, which means their total contribution limit will be $31,000 next year.
Starting next year, people ages 60 to 63 will be able to make extra extra contributions to their 401(k)s for the first time ever thanks to the SECURE 2.0 Act. Their "super" catch-up contribution limit is $11,250, meaning they can max out 401(k)s with $34,750 in 2025. The Wall Street Journal is calling this "the biggest change to 401(k) contribution rules in two decades."
401(k) contribution limit for 2025
A 401(k) is an employer-sponsored plan that allows workers to allocate a portion of their income to a tax-advantaged account. You contribute pre-tax dollars, which reduces your taxable income for that year, and you typically don't pay any taxes until you access the funds in retirement. This tax deferment is typically beneficial because there's a good chance you'll be in a lower tax bracket when you stop working.
This year, the limit is $23,000, and there's still time to potentially make a plan to hit that max, as the contribution deadline is Dec. 31.
Why is the IRS increasing the 401(k) contribution limit for 2025? It's just an adjustment to account for inflation. Contribution limit increases are enacted on an annual basis, when necessary.
In addition to 401(k)s, the $23,500 annual limit will also apply to 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan.
IRA contribution limit for 2025
The $7,000 individual retirement account (IRA) limit will not change in 2025 because inflation was not high enough to warrant it. People 50 and older can also make catch-up IRA contributions, and the limit will remain at $1,000.
However, the income caps to be eligible to make tax-deductible IRA contributions and to contribute to a Roth IRA will increase for 2025.
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