New Year, New Limits: IRS Announces 2025 Contribution Caps for Retirement Savings
As we ring in the new year, the Internal Revenue Service (IRS) has unveiled its updated contribution limits for 2025, giving savers a clearer picture of how to maximize their retirement savings. The agency’s announcement brings welcome news for those looking to boost their nest eggs.
401(k) Contribution Limits Get a Boost
For 2025, the IRS has increased the 401(k) contribution limit to $23,500, a move that will benefit workers of all ages. However, catch-up contributions for those 50 and older will remain unchanged at $7,500. This limit applies to various workplace plans, including 401(k)s, 403(b)s, and most 457 plans, as well as the federal Thrift Savings Plan.
Roth IRA Limits and Income Thresholds Also See an Increase
In addition to the 401(k) updates, the IRS has also announced new individual retirement account limits and higher income thresholds for Roth IRA contributions in 2025. This means that more people will be eligible to contribute to these popular retirement vehicles.
A Special Break for Savers 60-63
Thanks to the Secure 2.0 legislation, savers between the ages of 60 and 63 will be able to take advantage of an even higher catch-up contribution limit in 2025. This group will be able to contribute an additional $11,250, bringing their total contribution limit to $34,750.
A Wave of Inflation Adjustments
The IRS announcement is just one part of a broader package of inflation adjustments for 2025, which includes updates to federal income tax brackets, capital gains tax brackets, and the estate and gift tax exemption, among others. These changes aim to help Americans keep pace with rising costs and plan for their financial futures.
By understanding these new limits and rules, individuals can make informed decisions about their retirement savings and create a more secure financial future.
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