Americans can put away more money in their workplace retirement plans in 2025, thanks to the new updates from the IRS. There’s been an adjustment from the IRS regarding 401(k) contribution limits for 2025, including new provisions for “super catch-up” contributions.
In its release on Friday, the IRS said it increased the annual employee deferral limit to $23,500, from $23,000 in 2024, for workplace plans. These also include 401(k)s, 403(b)s, governmental 457 plans, and the federal government’s Thrift Savings Plan. Catch-up contributions for participants aged 50 and older will stay at $7,500, bringing their total contribution limit for 2025 to $31,000.
The IRS also unveiled individual retirement account limits and bigger income thresholds for Roth IRA contributions for 2025.
Overall, this announcement comes a week after the IRS revealed several inflation adjustments for 2025. Along with these changes, other updates include federal income tax brackets, higher capital gains rates, an increased estate and gift tax exemption, and revised eligibility for the earned income tax credit. Together, these adjustments aim to help taxpayers navigate the financial impacts of inflation.
“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.”
Overall, these change aims to address the retirement savings gap for older workers and encourages greater financial preparation for retirement.
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