IRS Raises 401(k) Contribution Limit for 2025

Employees will be able to put more money into their 401(k)s next year.

Starting in 2025, employees can contribute up to $23,500 into their 401(k) and 403(b) plans, most 457 plans, and the Thrift Savings Plan for federal employees, the IRS announced Nov. 1. That’s a $500 jump from the $23,000 limit in 2024.

The catch-up contribution limit for employees ages 50 and older who participate in 401(k) and 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan will remain at $7,500, the same amount as in 2024. However, starting in 2025, employees ages 60 to 63 who participate in one of those work plans have a higher catch-up contribution limit—$11,250, instead of $7,500.

The limit on total employer-plus-employee contributions to defined contribution plans will increase to $70,000 in 2025, up from $69,000 in 2024.

Although the announcement comes after most organizations have already started open enrollment for next year, employers will still want to convey the news to employees now and throughout the next year. Employees can usually make changes to their retirement account contribution rates year-round, though some employers place limits on how often plan participants can make an adjustment.

Although 401(k) contribution limits usually increase yearly, most employees are far from hitting them. According to Vanguard data, for instance, only 14% of employees maxed out their 401(k)s in 2023.

At the same time, employees’ needs for retirement are rising. U.S. residents’ “magic number” for retirement surged to an all-time high earlier this year—rising much faster than the rate of inflation, according to data from Northwestern Mutual. On average, U.S. adults now believe they will need $1.46 million to retire comfortably, a 15% jump over the $1.27 million reported last year and a whopping 53% surge from the $951,000 target they reported in 2020.

Defined Benefit Plan Limits

The IRS also announced defined benefit plan limits for 2025.

Effective Jan. 1, the maximum annual benefit that may be provided through a defined benefit plan is $280,000, up from $275,000 in 2024.

For a participant who separated from service before Jan,1, 2025, the participant’s limitation under a defined benefit plan under section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2024, by 1.0262, the IRS said.

IRA Limits, Saver’s Credits

The limit on annual contributions to an IRA in 2025 remains $7,000, the IRS said. The IRA catch-up contribution limit for individuals ages 50 and older also stayed at $1,000 for 2025, the IRS said.

For individual taxpayers who are covered by a workplace retirement plan, the traditional IRA contribution tax deduction phase-out range will rise to between $79,000 and $89,000 in 2025—up from $77,000 and $87,000. For married couples filing joint tax returns, the phase-out range rises to between $126,000 and $146,000, a $3,000 jump from last year.

The income phase-out range for taxpayers who are contributing to a Roth IRA increased to between $150,000 and $165,000 for individuals and heads of households. That’s up from between $146,000 and $161,000. For married couples filing jointly, the phase-out range rises by $6,000 to between $236,000 and $246,000.

In 2025, the Saver’s Credit, also known as the Retirement Savings Contributions Credit, for low-income and moderate-income workers will rise to $39,500 for individuals (up from $38,250 in 2024), $79,000 for married couples filing jointly (up from $76,500), and $59,250 for heads of household (up from $57,375).

Details on these and other retirement-related cost-of-living adjustments for 2025 are in Notice 2024-80.