The IRS has exciting news for retirement plans and retirement savers. They recently unveiled the annual contribution limits for qualified defined contribution plans and individual retirement accounts for the 2025 tax year.

If you’re participating in 401(k), 403(b), or most 457 plans, including the federal government’s Thrift Savings Plan, you’ll be pleased to know that the annual contribution limit is increasing to $23,500 from $23,000 in 2024. This adjustment, based on a third-quarter inflation rate of 3.2%, rounds down to the nearest $500.

For those aged 50 and older, catch-up contributions will remain at $7,500, raising the total allowable annual contribution to a robust $31,000 for qualifying plans in 2025. The super catch-up provision from the SECURE 2.0 Act takes effect in 2025. Individuals aged 60 to 63 can now contribute an impressive $11,250 instead of the standard $7,500.

Traditional IRA – Individual Retirement Plans

The annual IRA contribution limit stays steady at $7,000. The catch-up contribution limit for those over 50 is still $1,000. Although this will feature annual cost-of-living adjustments moving forward.

Additionally, the phase-out range for single taxpayers in workplace plans climbing to $79,000 to $89,000. Married couples rises to $126,000 to $146,000. Those not covered by a workplace plan but married to someone who is will see their phase-out range increase to $236,000 to $246,000. While married individuals filing separately will remain between $0 and $10,000.

Roth IRA’s

For Roth IRAs, singles and heads of household can enjoy an expanded income phase-out range of $150,000 to $165,000. Married couples filing jointly will see theirs between $236,000 and $246,000. Married individuals filing separately didn’t change.

Saver’s Credit

The income limit for the Saver’s Credit will also rise to $79,000 for married couples filing jointly, $57,375 for heads of household, and $39,500 for singles and those married filing separately. The contribution limit for SIMPLE retirement plans will increase to $16,500, with a higher limit of $17,600 for certain SIMPLE plans in 2025. The catch-up contribution limit for employees aged 50 and older in most SIMPLE plans stays at $3,500. While a different limit of $3,850 applies to certain SIMPLE plans. Additionally, those aged 60 to 63 participating in SIMPLE plans will benefit from a higher catch-up limit of $5,250. Finally, the minimum threshold for employees to be classified as highly compensated will rise to $160,000 in 2024 from $155,000. The full notice can be found here Notice 2024-80.