Each year, the IRS makes cost of living adjustments to retirement plan contributions limits, specifically, for IRA, 401(k), and similar plans. Because of inflation over the last few years, limits, including how much you can save, and income restrictions that may limit tax deduction, have increased. Although the IRA contribution limit is unchanged from last year, you may save more with a workplace 401(k) plan. Further, because of SECURE Act 2.0, older savers can put away more money for retirement. Here is a breakdown of what you can expect to see for 2025.
2025 IRA Contribution Limits
IRA contribution limits remain largely unchanged for next year:
| 2024 | 2025 | |
|---|---|---|
| IRA Limit | $7,000 | $7,000 |
| IRA Catch-Up Contribution | $1,000 | $1,000 |
| Total Limit | $8,000 | $8,000 |
| SEP IRA | $69,000 | $70,000 |
| SIMPLE IRA | $16,000 | $16,500 |
| SIMPLE Catch-Up (age 50+) | $3,500 | $3,500 |
| SIMPLE Catch-up (age 60-63) | N/A | $5,250 |
| Total Limit | $19,500 | $20,000 |
After a $500 increase to the IRA annual limit in 2024, there was no change to next year’s limit. Eligible savers can contribute $7,000 for both 2024 and 2025. For those who are age 50 and older, you can contribute an additional $1,000 annually, bringing your total to $8,000, the same as it was last year. This limit applies to all types of IRAs including Self-Directed IRAs, which can be Traditional or Roth.
Small business owners or self-employed individuals who have a SEP IRA can save $70,000 in 2025, an additional $1,000 over last year’s limit. For those age 60-63, you can contribute an additional $1,750 thanks to SECURE Act 2. For those with a SIMPLE IRA, you can contribute an additional $500 for 2025 which brings the annual limit to $16,500, plus an additional $3,500 if you are at least age 50, which is the same as 2024.
Deductible Phase-Outs
One of the biggest benefits of saving with a traditional IRA is the upfront tax break you receive. However, in order for your contribution to be deductible on your tax return, you must be under a certain income. If you are under the limit, you can take a full deduction. The deductible amount is “phased out” until you reach the maximum annual income, at which point, you do not receive any deduction for your IRA contribution.
| Filing Status | Phase-out Begins | Phase-out Ends |
|---|---|---|
| Single or Head of Household/Covered by a workplace plan | $79,000 | $89,000 |
| Married Filing Jointly/IRA Contributor Covered by a workplace plan | $126,000 | $146,000 |
| Married Filing Jointly/IRA Contributor Not Covered but Spouse is | $236,000 | $246,000 |
The deductibility of your IRA contributions is dependent on your modified adjusted gross income (MAGI) and filing status. Using the chart above, you can determine if you get an upfront tax break from your pretax (traditional) IRA contributions. If your income is below the beginning threshold, your contribution is fully deductible. Conversely, if your income is above the phase-out limit, you receive zero tax break. Everything in between, you would receive a reduced deduction.
Roth IRA Income Restrictions
While a traditional IRA offers tax-deductible contributions for those who qualify, there is no deduction for Roth IRAs since Roths are funded with after-tax money. However, all qualified distributions from a Roth are tax free during retirement. Traditional IRAs are taxable upon withdrawal. The caveat is that high-income earners cannot directly contribute to a Roth IRA. Much like the traditional phase-outs, there are phase-outs on the income limits for Roth IRAs as follows:
| Filing Status | Phase-out Begins | Phase-out Ends |
|---|---|---|
| Single Filers and Heads of Household | $150,000 | $165,000 |
| Married Filing Jointly | $236,000 | $246,000 |
Just like the traditional IRA deduction limits, if you are under the beginning number, you can make a full Roth IRA contribution. However, if you are above the income threshold, you cannot make a direct Roth IRA contribution. If you fall within either range, you can make a partial contribution. The 2025 Roth IRA income limit goes up by $4,000 for single filers and $6,000 for married filers filing jointly.
Note: High earners can still get funds into a Roth using the Backdoor Roth IRA strategy. You can simply contribute after-tax funds to a traditional plan and then convert that amount into a Roth at any time.
2025 401(k) Contribution Limits
Whether you are an employee of a business or self-employed, you may contribute more to your 401(k), 403(b), 457 plans, and the Thrift Savings Plan (TSP). The annual limit will increase by $500 in 2025. The catch-up limit will remain the same, but there’s a new catch-up contribution for those ages 60-63.
Here is what you can expect for 401(k) and similar plans next year:
| 2024 | 2025 | |
|---|---|---|
| Employee Deferral | $23,000 | $23,500 |
| Employer Contribution | $46,000 | $46,500 |
| Catch-up Contribution (age 50+) | $7,500 | $7,500 |
| Catch-up Contribution (age 60-63) | N/A | $11,250 |
| Total Limit (under age 50) | $69,000 | $70,000 |
| Total Limit (age 50+) | $76,500 | $77,500 |
| Total Limit (age 60-63) | $69,000 | $81,250 |
Unlike IRAs, 401(k) plans did see an increase to how much one can put away for retirement. This is especially true for those who are between the ages of 60 and 63 because of a provision to the SECURE Act 2. Employees can contribute up to $23,500 in 2025, plus an additional $7,500 if he or she is at least age 50 (for a total of $31,000). Plus, if you are between the ages of 60 and 63, that number increases to $34,750.
Those with self-employment income can contribute as both the employee and employer up to the annual limit. This means anyone with a Solo 401(k) plan may contribute up to $70,000 in 2025. If you are at least age 50, you may contribute up to $77,500. Lastly, if you’re self-employed between the ages of 60 and 63, you may contribute up to $81,250.
The percentage of your business/self-employment income that is used to determine the amount you can contribute as the employer is known as the 401(a) limit. The compensation used for this calculation increases to $350,000, which is $5,000 more than in 2024.
It’s important to keep in mind that the overall contribution limit is for all 401(k) plans, and types of contributions in the aggregate. Therefore, if you contribute to a 401(k) plan through your employer, this lowers the amount you can save in your Solo 401(k) plan. If you only have one 401(k) plan, you may contribute the maximum to that plan.
Saver’s Credit
The saver’s credit is an incentive for low- and moderate-income earners. This tax credit is provided to those people who save for retirement, and who are under certain income thresholds. To receive the credit, your annual income in 2025 must fall below $79,000 if you are married filing jointly, $57,375 if you file as a head of household, or $39,500 if you are a single filer or married filing separately, up from $76,500, $57,375, and $38,250 respectively.
Conclusion
Because of inflation, we’ve seen solid cost-of-living adjustments to the contribution limits over the last couple of years. That was not the case for 2025, as only 401(k) plans saw a modest increase of $500. The IRA limits remain unchanged. However, there is a significant benefit for those between the ages of 60 and 63, whether you save through a workplace SIMPLE IRA or 401(k) plan. For those individuals, you can now supercharge your catch-up contributions for each of those four years. The ability to save more, especially as you reach those milestone years, is paramount for you retirement planning.
Remember the updated numbers presented here are for 2025. You still have plenty of time to maximize your contributions for this year. 401(k) employee contributions are due by the end of the year, however, most other contributions can be done next year (before you file your taxes).
