Boost Your Retirement Savings: New 401(k) Contribution Limits Announced for 2025
The Internal Revenue Service (IRS) has released new guidelines for 401(k) contribution limits in 2025, providing a boost to retirement savers. As of next year, employees can defer up to $23,500 into their workplace plans, a $500 increase from 2024. This change applies to various plans, including 401(k)s, 403(b)s, and most 457 plans, as well as the federal Thrift Savings Plan.
Catch-Up Contributions for Savers 50 and Older
For those aged 50 and above, the catch-up contribution limit remains at $7,500 in 2025. However, thanks to changes introduced by Secure 2.0, investors between 60 and 63 can contribute an additional $11,250, surpassing the standard deferral limit.
Current Savings Rates: Room for Improvement
Despite the increased limits, many employees are not taking full advantage of their retirement savings opportunities. According to Vanguard’s 2024 How America Saves report, only 14% of employees deferred the maximum amount into 401(k) plans in 2023. The average 401(k) deferral rate was approximately 7.4%, with a combined savings rate of 11.7% when including employer contributions.
IRS Announces Inflation Adjustments for 2025
The IRS announcement comes on the heels of dozens of inflation adjustments for 2025, including changes to federal income tax brackets, capital gains tax brackets, and the estate and gift tax exemption. These updates aim to help individuals and families better navigate the complexities of personal finance and retirement planning.
By taking advantage of the new 401(k) contribution limits and catch-up contributions, individuals can make significant strides in securing their financial futures. Now is the perfect time to review your retirement strategy and make adjustments to ensure you’re on track to meet your long-term goals.
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