By Ian Salisbury
Nov. 5, 2024
Retirement savers will be able to put away a little bit more in their 401(k)s next year—but not their individual retirement accounts.
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On Friday, the Internal Revenue Service unveiled new contribution limits for both types of accounts. In 2025, savers will be able to contribute $23,500 to their 401(k)s, up from $23,000 in 2004. The same limit also applies to similar 403(b) and 457 plans, as well as the government’s Thrift Savings Plan.
For IRAs, the contribution limit will remain unchanged at $7,000. The catch-up contribution limit, for savers aged 50 and older, will also stay the same at $1,000.
Many 401(k) savers will also see catch-up contributions remain unchanged at $7,500, the same level as in 2024. But older 401(k) savers, aged 60 to 63, will see catch-up contribution limits jump to $11,250 in 2025—a change made as a result of the 2022 Secure 2.0 Act.
The IRS adjusts retirement plan savings limits each year, to accommodate for inflation, just as it does other tax thresholds like income-tax brackets. This year’s increase is smaller than in some past years, no doubt thanks to moderating inflation, which is now close to the Federal Reserve’s 2% target.
The 2025 adjustments, which change some key 401(k) thresholds while leaving IRA thresholds alone, could advantage workers with full-time jobs at larger employers, since they are more likely to have 401(k)s.
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