The IRS has announced the cost‑of‑living adjustments for pension plans and other retirement-related items for tax year 2025.
The IRS has announced that the amount of tax-favored funds that you can sock away for retirement is increasing. In 2025, the amount individuals can contribute to their 401(k) plans will tick up to $23,500—it was $23,000 for 2024.
The announcement is tied to cost‑of‑living adjustments for pension plans and other retirement-related items for tax year 2025 (those adjustments are required by law).
Here’s a look at some of the most common plans and what will be different next year:401(k) and Similar Plans
As noted, the amount individuals can contribute to their 401(k) plans is $23,500—that limit applies to employee contributions made to 401(k) plans and similar plans maintained by non-profit and government employers—403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan for workers.
The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan remains $7,500 for 2025 (the same as in 2024). That means that participants in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan who are 50 and older generally can contribute up to $31,000 each year, starting in 2025.
In good news for younger seniors, SECURE 2.0 allows for a higher catch-up contribution limit for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 (compared to $7,500 for everyone else).IRA Plans
There’s no boost in the limit on annual contributions to an IRA—that remains $7,000. The limit applies to the total amount contributed to your traditional and Roth IRAs. IRA plans also allow catch‑up contributions for individuals aged 50 and over—that remains $1,000 for 2025, for a total of $8,000 for workers age 50 and above.
With a traditional IRA, contributions are tax-advantaged. If you meet the criteria—that’s where these limits come into play—contributions will be tax-deductible, resulting in a lower tax bill. As with a 401(k) plan, the earnings inside an IRA grow tax-deferred and are subject to tax when you make withdrawals.
In addition to the contribution limits, phase-outs apply. What this means is that if during the year, you or your spouse was covered by a retirement plan at work, your tax deduction may be reduced, or phased out, until it is eliminated, depending on your filing status and income. Here are the phase‑out ranges for 2025:
For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $79,000 and $89,000, up from between $77,000 and $87,000 in 2024.
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $126,000 and $146,000, up from between $123,000 and $143,000 in 2024.
