Retirement accounts like 401(k)s and IRAs are critical financial tools that many Americans use to build wealth and save for retirement in a tax-advantaged way. However, the rules surrounding these accounts are constantly changing. If you aren’t up-to-date with key rule changes, then you could miss out on key opportunities to secure your retirement. In this article, we’ll discuss recent changes to the 2025 retirement contribution limits.
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What is a Retirement Account?
A retirement account, or retirement plan, is a type of financial account that allows you to save for retirement in a way that offers significant tax advantages. There are two main categories of retirement plans: 401(k)s and Individual Retirement Accounts (IRAs).
401(k) retirement plans are investment accounts that are usually covered by a workplace. Employers that offer 401(k)s will allocate a portion of each employee’s wages to an individual investment account, helping that employee invest their money and prepare for retirement. Common types of 401(k) plans include:
- Traditional 401(k): Allows employees to make pre-tax contributions to an investment account by deferring a portion of their earnings.
- Roth 401(k): An account where employees contribute with after-tax income. There’s no tax deduction in the contribution year, but withdrawals are tax-free
- SIMPLE 401(k): Allows small businesses to offer effective, cost-efficient retirement benefits to their employees.
If your employer does not offer a workplace retirement plan—or you simply want more control over your retirement—then you can also open up an Individual Retirement Account (IRA). An IRA allows you to make tax-deferred investments to provide financial security when you retire. Some of the most common plans are:
- Traditional IRA: A tax-advantaged personal savings plan where contributions may be tax deductible.
- Roth IRA: A tax-advantaged personal savings plan where contributions are not deductible but qualified distributions may be tax-free.
Regardless of which plan you choose, the Internal Revenue Service places a limit on the amount of money that you can contribute each year. Let’s explore the 2025 annual contribution limits for 2025 in closer detail.
401(k) Contribution Limits 2025
The 401(k) contribution limit for 2025 is $23,500 (up from $23,000 in 2024), according to the Internal Revenue Service. This contribution limit applies to:
- 401(k) plans
- 403(b) plans
- Governmental 457 plans
- Thrift Savings Plans
The 401(k) catch-up contribution for 2025 is $7,500. This applies to employees ages 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and Thrift Savings Plans. These employees will be able to contribute a total of $31,000 ($23,500 + $7,500 = $31,000) to their retirement plans each year, starting in 2025.
Employees ages 60, 61, 62, and 63 have a higher catch-up contribution limit. These employees can contribute an additional $11,250 to their retirement plans, or $34,750 total ($23,500 + $11,250 = $34,750).
Have additional questions on how to make the most of these contribution limits? Be sure to contact an advisor on the ARQ Wealth Team and we’ll be able to offer more personalized advice.
IRA Contribution Limits 2025
The IRA contribution limit for 2025 is $7,000 (unchanged from 2024), according to the Internal Revenue Service. This applies to most types of IRAs, including:
- Roth IRAs
- Traditional IRAs
- SEP IRAs
- Traditional IRAs
The IRA catch-up contribution for 2025 is $1,000. This applies to individuals ages 50 and over who contribute to an IRA. These individuals can contribute a total of $8,000 ($7,000 + $1,000 = $8,000) to their IRA in 2025.
FAQs
Here are some frequently asked questions about retirement contributions in 2025:
What will retirement contributions be in 2025?
The 401(k) contribution limit will be $23,500 and the IRA contribution limit will be $7,000 in 2025, according to the IRS. Including catch up contributions, the 401(k) contribution limit will be $31,000 and the IRA contribution limit will be $8,000 in 2025.
What is the 401k contribution limit for 2024 over 50 catch-up?
The 401(k) catch-up contribution for 2025 is $7,500. This applies to employees ages 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and Thrift Savings Plans.
When can I contribute to my 2025 IRA?
You can start making contributions to your 2025 IRA as early as January 1st, 2025, and can continue to contribute through the tax filing deadline of the following year (April 15th, 2026).
Bottom Line
Retirement accounts play a critical role for millions of Americans, helping them secure a stable retirement while paying reduced taxes. As a general rule of thumb, it’s best to contribute as much as possible to your retirement account, aiming to max out your contributions each year.
Here are a few more best practices when it comes to maximizing your 401(k) or IRA:
- Contribute early and often: The more money you can contribute to your accounts early on, the better off you will be. Starting early will give your account plenty of time to grow and take advantage of compound interest. If you start saving a bit later in life, then be sure to max out your catch-up contribution limits.
- Take advantage of “employer match” programs: Many employers will “match” your contributions to your retirement account. For example, if you contribute $1,000 then your employer will also contribute $1,000. This is essentially free money that you can put towards your financial future.
- Use retirement contributions to offset your income: Contributions to your retirement accounts can often be used to help reduce your taxable income to save money on taxes. The IRS also offers several tax incentives, such as the retirement savings contributions credit (Saver’s Credit), to help reward Americans who save for retirement.
- Know your retirement needs: Calculate how much you’ll need to retire comfortably and make sure that you’re saving enough to hit that figure. If you need help with this step, it’s best to speak with a certified retirement planner who can help you figure out exactly how much you’ll need to retire comfortably and chart a course for you to reach that goal.
We hope that you’ve found this article valuable when it comes to learning about the 2025 retirement contribution limits. Visit the ARQ Wealth University section of our website to learn more about how you can become financially secure.
