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On November 1, 2024, the IRS released Notice 2024-08 which outlines contribution limits and retirement account changes for 2025. These updates include cost of living adjustments to compensate for inflation.
Here’s what you need to know:
401(k) Accounts
For 401(k), as well as 403(b), and government 457 or TSP account (qualified plans) participants, the IRS has increased the contribution limits from $23,000 (2024) to $23,500 in 2025. Why the increase? These plans were designed to help the average worker save more for retirement. Each year, in an effort to account for inflation and rising cost of living, the IRS adjusts contributions for retirement plans.
Health Savings Accounts
In a separate notice (RP-2024-25) the IRS released updates for HSAs. For those participating in a self-only coverage plan, the contribution limit will increase from $4,150 to $4,300 in 2025. Those participating in a family plan will also see an increase in contribution limits. The IRS increased the contribution limit on family coverage plans to $8,550 for 2025.
Catch-Up Contributions
The additional amount individuals 50 or older may contribute to retirement plans remains unchanged for 2025. However, starting in 2025, those 60-63 years of age enrolled in a qualified retirement plan (401(k), 403(b), 457) may make catch-up contributions up to $11,250.
For those employed and participating in a SIMPLE IRA, the catch-up contribution limit remains at $3,500 for those age 50 or older. Much like we mentioned before, those SIMPLE IRA holders ages 60-63 will see an increase to their catch-up contribution limit in 2025, of up to $5,250.
This is incredible news for those planning to ramp up their savings before retirement!
| Account Type |
2025 Individual Contribution Limits |
2025 Catch-up Contribution Limits |
| Roth IRA |
$7,000(no change) |
$1,000 (ages 50+, no change) |
| Traditional IRA |
$7,000 (no change) |
$1,000 (ages 50+, no change) |
|
SIMPLE IRA |
$16,500 (increased) |
$3,500 (ages 50+, no change) $5,250 (increased – ages 60-63 only) |
| Qualified Plans (401(k), 403b, TSP) |
$23,500 (increased) |
$7,500 (ages 50+, no change) $11,250 (increased – ages 60-63 only) |
| Health Savings Account |
$4,300 (self-only coverage) (increased) $8,550 (family coverage) (increased) |
$1,000 (ages 50+, no change) |
Other retirement plan changes
The contribution limits for IRAs remain unchanged for 2025. While the limit remains at $7,000 there are phase out changes coming for Traditional and Roth IRAs.
Phase out limits or ranges are the income levels at which your IRA contributions may either be reduced (if your income is within the range) or eliminated (if your income exceeds the range). If your income exceeds the phase out threshold, your contribution may not be deductible, and those with a ROTH plan may not be able to contribute at all.
For Traditional IRAs the phase-out range is increasing from $77,000 – $87,000 in 2024 to $79,000-$89,000 in 2025.
For Roth IRAs the phase-out range is increasing from $146,000 – $161,000 in 2024 to $150,00-$165,000. This change may allow for those with higher incomes to contribute to a Roth IRA in 2025!
Additional changes or limitations may apply depending on your tax-filing and marital status. For questions regarding how much you may contribute, if you may contribute, or if your contribution may be tax-deductible, please contact a tax professional.
A few addition details to keep in mind:
- Contribution limits are per person (account holder), not per account. If you hold multiple retirement accounts, your total contribution across those accounts cannot exceed the annual contribution limit.
- Your annual contributions are also limited to income you’ve earned in a given year. You cannot contribute more than you’ve earned.
New Direction Trust does not provide tax or financial advice. The information provided is purely informational and is not intended to be nor should it be considered tax or financial guidance. To learn more about how to leverage the aforementioned plans and how to plan for the upcoming tax-year, please consult with a financial advisor.
