The Internal Revenue Service (IRS) has announced the contribution limits for retirement plans for 2025, reflecting cost-of-living adjustments aimed at helping savers prepare for retirement.
Key Contribution Limits for 2025
401(k), 403(b), and Similar Plans: The contribution limit for these workplace retirement accounts has increased to $23,500, up from $23,000 in 2024. Individuals aged 50 and over can still make an additional $7,500 in catch-up contributions, bringing their total to $31,000.
Potential Strategy – if you have the ability to make after-tax non-Roth contributions, then you could make even larger contributions toward a Roth (ie Mega Roth Conversion).
Enhanced Catch-Up Contributions (Ages 60–63): Under the SECURE 2.0 Act, employees aged 60, 61, 62, or 63 are eligible for a higher catch-up limit of $11,250 in 2025. This provides these workers a unique opportunity to save more as they approach retirement. It would’ve been nice if they extended the age to at least 65. Any incentive for people to save more is crucial.
Potential Strategy – by making additional catch-up contributions, you could decrease your income enough to stay below the IRMAA limits.
Traditional and Roth IRAs: The annual contribution limit for IRAs remains $7,000, with an additional $1,000 catch-up contribution allowed for individuals aged 50 and older.
Income limits for deducting traditional IRA contributions and contributing to Roth IRAs have been adjusted, expanding eligibility for higher-income earners. For Roth IRAs, the income phase-out range for single filers is now between $150,000 and $165,000, up from $146,000 to $161,000 in 2024.
Potential Strategy – above the income threshold? No worries, execute a backdoor Roth conversion.
HSAs provide a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. The 2025 limits are as follows:
Self-only coverage: Maximum contribution: $4,300, up from $4,150 in 2024.
Family coverage: Maximum contribution: $8,550, up from $8,300 in 2024.
Catch-up contributions: Individuals aged 55+ can contribute an additional $1,000.
Potential Strategy – pay medical expenses out of pocket and let the account grow. Since there is no timeline to submit receipts for medical expenses, you can cash in years from now. Just don’t forget to save your receipts.
Why These Changes Matter
The higher limits provide an excellent opportunity to maximize retirement savings, particularly for those in their peak earning years. Workers in their early sixties can take advantage of the enhanced catch-up contributions to significantly boost their retirement funds. Additionally, expanded income ranges for IRA deductions and Roth contributions mean that more individuals can benefit from tax-advantaged retirement savings.
About Michael
Michael is a CFP® with over 15 years of experience working with families accumulating and preserving wealth. Do you need help planning for your financial future? Contact us today to set up a meeting to talk about your goals.