The IRS recently announced a brand new contribution limit for 401(k) plans in 2025, raising the limit to $23,500. This $500 increase over the 2024 limit is meant to support individuals seeking to construct retirement savings within the face of rising costs. Savers aged 50 and over can contribute a further $7,500 as a part of the “catch-up” provision, allowing those nearing retirement to spice up their savings.
However, individual retirement account (IRA) limits remain at $7,000 and have remained unchanged since 2019. The “catch-up” provision for IRAs allows those age 50 and older to contribute a further $1,000. This border stability goals to take care of access for savers in numerous income brackets, because the IRS has not deemed inflation sufficient to justify a rise.
The recently passed SECURE 2.0 Act introduces higher catch-up contributions for people ages 60 to 63, addressing the unique financial planning needs of this age group. This provision is meant to assist those nearing retirement who might have to speed up their savings efforts on account of late or interrupted contributions earlier in life.
Additionally, the IRS has modified the income phase-out ranges for each traditional IRAs and Roth IRAs. These adjustments are intended to be certain that savers make their contribution in accordance with their income level and so tax benefits are targeted to those that need them most. The recent opt-outs will allow more Americans to make the most of these savings tools upfront of retirement. For more information, see IRS announcement.
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