Hey guys, Bette Hochberger, CPA, CGMA, and for today’s quickie, I wanted to come on and share some recent news from the IRS. In an exciting development for retirement savers, the IRS has announced that the contribution limit for 401(k) plans will rise to $23,500 in 2025, up from $23,000 in 2024. This increase is part of a broader adjustment of cost-of-living limits that will affect various retirement-related accounts, as detailed in Notice 2024-80 released today on IRS.gov.

Key Changes for 2025

Here are the essential highlights regarding contribution limits and adjustments for the upcoming tax year:

401(k) Plans

– New Contribution Limit: The annual contribution limit for employees participating in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan will increase to $23,500.

Individual Retirement Arrangements (IRAs)

– IRA Contribution Limit: The contribution limit for traditional and Roth IRAs remains steady at $7,000.
– Catch-Up Contributions: For those aged 50 and over, the catch-up contribution limit remains at $1,000.

Catch-Up Contributions for Older Workers

– For employees aged 50 and over participating in most retirement plans (401(k), 403(b), etc.), the catch-up contribution limit remains at $7,500. However, a higher limit of $11,250 applies for those aged 60 to 63.

Income Phase-Out Ranges

– Traditional IRA Contributions: The phase-out range for single taxpayers covered by a workplace retirement plan has increased to $79,000 – $89,000. For married couples filing jointly, the range is now $126,000 – $146,000.
– Roth IRA Contributions: The income phase-out range for single filers is now $150,000 – $165,000, while for married couples, it is $236,000 – $246,000.
– Saver’s Credit: The income limit for the Saver’s Credit will be $79,000 for married couples filing jointly, $59,250 for heads of household, and $39,500 for singles and married individuals filing separately.

SIMPLE Retirement Accounts

– The contribution limit for SIMPLE retirement accounts increases to $16,500, with a higher contribution limit of $17,600 for certain applicable plans.
– The catch-up contribution limit for employees aged 50 and over remains at $3,500, while those aged 60 to 63 can contribute up to $5,250.

These adjustments by the IRS are designed to help individuals save more for retirement, particularly in light of rising living costs. As we approach 2025, it’s a great time for savers to review their retirement plans and consider maximizing their contributions. Whether you’re just starting to build your nest egg or you’re nearing retirement, understanding these changes can help you make informed decisions about your financial future.

I hope you learned something new today. Stay tuned for more updates, and make sure to check the IRS website for detailed guidance on how these changes may affect your specific situation!

As always, stay safe, and I’ll see you next time.