The Internal Revenue Service (IRS) has announced significant updates to retirement savings plans for 2025, allowing Americans to contribute more to their 401(k) accounts. These changes include an increased annual contribution limit and a new “super catch-up” provision for individuals aged 60 to 63.
Increased 401(k) Contribution Limits for 2025
Starting in 2025, the annual employee deferral limit for 401(k), 403(b), governmental 457 plans, and the federal Thrift Savings Plan will rise to $23,500, up from $23,000 in 2024. This adjustment allows workers to allocate more of their pre-tax income toward retirement savings.
Standard Catch-Up Contributions Remain Unchanged
For participants aged 50 and above, the catch-up contribution limit will remain at $7,500. This means that individuals in this age group can contribute a total of $31,000 to their 401(k) plans in 2025.
Introduction of Super Catch-Up Contributions for Ages 60-63
A notable addition for 2025 is the “super catch-up” contribution for employees aged 60 to 63. This provision allows eligible individuals to make an additional catch-up contribution of $11,250, bringing their total potential 401(k) contribution to $34,750 for the year. It’s important to note that this enhanced catch-up option is available only during the ages of 60 to 63; once an individual reaches 64, they revert to the standard catch-up limit of $7,500.
Employer Plan Amendments Required
Employers must amend their retirement plans to incorporate the super catch-up contribution option. Employees should consult with their HR departments or plan administrators to confirm the availability of this feature in their specific plans.
IRA Contribution Limits for 2025
The annual contribution limit for Individual Retirement Accounts (IRAs) will remain at $7,000 in 2025. The catch-up contribution limit for individuals aged 50 and above also stays at $1,000, allowing for a total IRA contribution of $8,000 for those eligible.
Summary of 2025 Contribution Limits
| Plan Type | Standard Contribution Limit | Catch-Up Contribution (Age 50+) | Super Catch-Up Contribution (Ages 60-63) | Total Potential Contribution |
|---|---|---|---|---|
| 401(k), 403(b), 457, Thrift Savings Plan | $23,500 | $7,500 | $11,250 | $34,750 |
| IRA | $7,000 | $1,000 | N/A | $8,000 |
These updates provide enhanced opportunities for individuals to bolster their retirement savings, particularly those nearing retirement age. By taking advantage of the increased contribution limits and the new super catch-up provision, workers can better prepare for their financial future.
FAQs
What is the new 401(k) contribution limit for 2025?
The annual employee deferral limit for 401(k) plans will increase to $23,500 in 2025.
Who is eligible for the super catch-up contribution?
Employees aged 60 to 63 are eligible for the super catch-up contribution of $11,250 in 2025.
Do employers need to update their plans to offer the super catch-up contribution?
Yes, employers must amend their retirement plans to include the super catch-up contribution option.
What is the total possible 401(k) contribution for someone aged 60-63 in 2025?
An individual aged 60 to 63 can contribute up to $34,750 to their 401(k) plan in 2025, combining the standard limit and the super catch-up contribution.
Have IRA contribution limits changed for 2025?
No, the IRA contribution limit remains at $7,000, with a $1,000 catch-up contribution for those aged 50 and above, totaling $8,000.