Current:Home > ScamsIRS raises 401(k) contribution limits, adds super catch-up for 60-63 year olds in 2025 -DataFinance
IRS raises 401(k) contribution limits, adds super catch-up for 60-63 year olds in 2025
View
Date:2025-04-17 05:27:53
Americans will be able to sock away more in their workplace retirement plans, before taxes, in 2025.
The IRS said on Friday it increased the annual employee deferral limit to $23,500, from $23,000 in 2024, for workplace plans, including 401(k)s, 403(b)s, governmental 457 plans and the federal government’s Thrift Savings Plan. Catch-up contributions for those participants aged 50 and up will remain at $7,500, which means their total contribution for 2025 is capped at $31,000.
In 2023, only 14% of employees maxed out their workplans, according to Vanguard's How America Saves report. In plans offering catch-up contributions, 15% of participants 50 or older contributed more, it said.
Starting in 2025, employees aged 60 to 63 years old who participate in one of those work plans have a higher catch-up contribution limit. That cap is $11,250, instead of $7,500.
"Once you hit age 64, you are no longer eligible for a super catch-up contribution and are limited to the regular catch-up contribution amount," said certified public accountant Richard Pon in San Francisco, California.
But remember, "right now, technically, there is no law that says that employers must offer a super catch-up contribution so I believe an employer’s retirement plan must be amended to specifically allow for a super catch-up contribution."
What are the IRA limits in 2025?
The limit on annual contributions to an IRA remains $7,000. The IRA catch‑up contribution limit for individuals aged 50 also stayed at $1,000 for 2025, after a cost-of-living adjustment, the IRS said.
Don't put all eggs in one basket:Focusing only on your 401(k) or IRA? Why that may not be the best retirement move.
Did income ranges change for contributions to traditional and Roth IRAs?
Yes, the income ranges to determne eligibility to make deductible contributions to a traditional IRA, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2025, the IRS said.
Here are the phase‑out ranges for 2025:
- For single taxpayers covered by a workplace retirement plan, the phase-out range rose to between $79,000 and $89,000, from $77,000 to $87,000.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range increased to $126,000 to $146,000, from $123,000 to $143,000.
- For an IRA contributor not covered by a workplace retirement plan and married to someone who is covered, the phase-out range is $236,000 to $246,000, up from $230,000 and $240,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
- The income phase-out range for taxpayers making contributions to a Roth IRA is $150,000 to $165,000 for singles and heads of household, up from $146,000 to $161,000. For married couples filing jointly, the income phase-out range rose to between $236,000 and $246,000, from $230,000 to $240,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA isn't subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
- The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $79,000 for married couples filing jointly, up from $76,500; $59,250 for heads of household, up from $57,375; and $39,500 for singles and married individuals filing separately, up from $38,250.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
veryGood! (18)
Related
- The Super Bowl could end in a 'three
- Surveillance video prompts Connecticut elections officials to investigate Bridgeport primary
- What Biden's unwavering support for autoworkers in UAW strike says about the 2024 election
- Danica McKellar Reveals Teen Love Triangle With Candace Cameron Bure and Jeremy Miller
- Where will Elmo go? HBO moves away from 'Sesame Street'
- At 91, Georgia’s longest serving sheriff says he won’t seek another term in 2024
- K-Pop Group Stray Kids' Lee Know, Hyunjin and Seungmin Involved in Car Accident
- Blinken says decisions like Iran prisoner swap are hard ones to make, amid concerns it encourages hostage-taking
- Chuck Scarborough signs off: Hoda Kotb, Al Roker tribute legendary New York anchor
- 10 protesters arrested for blocking bus carrying asylum-seekers
Ranking
- Charges tied to China weigh on GM in Q4, but profit and revenue top expectations
- Fishmongers found a rare blue lobster. Instead of selling it, they found a place it could live a happy life
- Debate over a Black student’s suspension over his hairstyle in Texas ramps up with probe and lawsuit
- John Grisham, George R.R. Martin and more authors sue OpenAI for copyright infringement
- Paula Abdul settles lawsuit with former 'So You Think You Can Dance' co
- UNESCO adds World War I remembrance sites to its prestigious heritage registry
- Ohio’s political mapmakers are going back to work after Republican infighting caused a week’s delay
- DeSantis plays up fight with House speaker after McCarthy said he is not on the same level as Trump
Recommendation
Why members of two of EPA's influential science advisory committees were let go
South Korean leader warns Russia against weapons collaboration with the North
Sheriff says 9 deputies charged in death of man beaten in Memphis jail
Woman rescued from outhouse toilet in northern Michigan after dropping Apple Watch, police say
Trump wants to turn the clock on daylight saving time
Record number of Australians enroll to vote in referendum on Indigenous Voice to Parliament
Video, frantic 911 call capture moments after Amazon delivery driver bitten by highly venomous rattlesnake in Florida
'I really wanted to whoop that dude': Shilo Sanders irked by 'dirty' hit on Travis Hunter