The IRS recently announced a new contribution limit for 401(k) plans in 2025, raising the cap to $23,500. This $500 increase from the 2024 limit is designed to support people who intend to build their retirement savings amid rising costs. Savers age 50 and older can contribute an additional $7,500 as part of a “catch-up” arrangement, allowing those approaching retirement to bolster their savings.
Individual Retirement Account (IRA) limits, however, remain at $7,000, unchanged from 2019. The “catch-up” provision of IRAs allows people age 50 and older to contribute an additional $1,000. This limit stabilization is intended to maintain accessibility for savers in all income brackets, since the IRS has not determined that inflation is sufficient to justify an increase.
The SECURE 2.0 Act, recently passed, introduces higher mortgage contributions for people aged 60 to 63, recognizing the unique financial planning needs of this age group. This program aims to help those nearing retirement who may need to accelerate their savings efforts due to delayed or interrupted contributions earlier in life.
Additionally, the IRS has changed the income exclusion ranges for both traditional IRAs and Roth IRAs. This adjustment is designed to ensure that savers contribute in line with their income levels, thereby targeting tax benefits to those who need them most. The new exit clauses will allow more Americans to tap into these savings tools before retirement. For more information, visit the IRS announcement.
Image Source: Flickr, No changes have been made to the original.
Source link
