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The 401(k) And IRA Contribution Limits For 2025: Here’s How Much You Can Save

November 4, 2024

The IRS has announced the 2025 contribution limits for 401(k) and IRAs.

Employees can defer $23,500 into workplace plans, a modest increase from $23,000 in 2024. The change applies to 401(k)s, 403(b)s and the majority of 457 plans, as well as the federal Thrift Savings Plan. The limit on annual contributions to an IRA, however, remains $7,000 — the same as in 2024.

The IRS sets annual caps on contributions to both workplace and individual retirement plans that fluctuate to keep up with inflation.

401(k) Contribution Limits For 2025

Workers who contribute to a 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan can contribute up to $23,500 in 2025, a $500 increase from the $23,000 cap in 2024. Spread evenly throughout the year, that’s a cap of about $1,958 a month or $980 per twice-monthly paycheck.

The limit on additional catch-up contributions for employees 50 or older is $7,500, the same as in 2024 and 2023. For those individuals, the total 401(k) contribution cap would be $31,000.

The maximum contribution set by the IRS doesn’t include what your employer can contribute in matching funds. The limit on combined employee and employer contributions is $70,000, up from $69,000 in 2024.

The catch-up contribution for employees 50 and older who contribute to a SIMPLE IRA remains $3,500.

Some 401(k) plans allow employees to make after-tax contributions to reach the combined employee and employer contribution limit. For example, if you maxed out 401(k) contributions in 2025 and your employer matched, that would only bring you to $47,000. If your plan allows, you could make additional after-tax contributions of up to $23,000 to meet the combined employee/employer limit of $70,000 for the year.

Unless rolled over to an IRA, the earnings on these after-tax contributions are tax-deferred, so tax is due when you withdraw.

IRA Contribution Limits For 2025

The limit for both traditional and Roth IRAs is $7,000 total from among all accounts, the same as it was in 2024. That breaks down to roughly $583 a month, or $292 per twice-monthly pay period.

Individuals 50 or older can make an additional $1,000 catch-up contribution, bringing their total IRA contribution limit to $8,000.

The income thresholds to be eligible for a Roth IRA are higher in 2025, however: For single and head-of-household taxpayers, the income phase-out range is between $150,000 and $165,000, up from $146,000 and $161,000 in 2024.

Married couples filing jointly have a higher income phase-out range, too, between $236,000 and $246,000, up from between $230,000 and $240,000. For married couples filing separately, the income phase-out range remains between $0 and $10,000.

Which Retirement Account Should You Contribute To?

Because 401(k) plans have higher limits than IRAs, it’s usually a good idea to enroll in a 401(k) if your employer offers one — especially if they match contributions.

A 401(k) allows you to defer paying taxes until you withdraw funds in retirement, letting your money grow tax-deferred. But you should consider adding a Roth IRA, as well: Contributions are typically made with after-tax money, which means your withdrawals later are tax-free. The different tax advantages and withdrawal options available in a 401(k) and a Roth IRA can help keep your retirement portfolio diversified.

Even if you don’t have access to a 401(k), a Roth IRA is still a smart choice — especially if you expect to be in a higher tax bracket when you retire.

 

Source: CNBC

Tags: 401(k) annual cap limits, federal thrift savings plan, ira contributions, irs filing, roth account
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