The IRS will shortly update the 401(k) cap. In fact, it will grow to $23,500 by 2025. However, if you have an IRA account, your limit remains $7,000.
The IRS set a contribution limit of $23,000 for 401(k) savings accounts in 2024. Therefore, the gain will not be considerable as it will only increase by $500.
IRS highlight of changes for 2025
The IRS will change the 401(k) contribution limit for 2025, and there are other key updates for individuals to consider. The annual contribution maximum for employees in 403(b), the federal government’s Thrift Savings Plan, and the governmental 457 plans will increase to $23,500, similar to the 401(k).
If you are 50 years or older and have a 401(k), you may want to know the catch-up contribution maximum for 2025. Unfortunately, it remains the same, therefore it will be $7,500 again in 2025 for:
- 401(k)
- 403(b)
- gov. 457 plans
- Fed Thrift Savings plans
As a result, individuals aged 50 and older can contribute up to $31,000 each year.
IRS unveils higher catch-up contribution limit for employees 60-63
Good news for employees aged 60, 61, 62, and 63 who participate in 401(k), 403(b), gov. 457, and Fed Thrift Savings plans. They will have a larger catch-up contribution maximum of $11,250.
For your information, it is only $7,500 in 2024. Individuals aged 60-63 who qualify and have sufficient funds can give $3,750 more than in 2024. Without a doubt, it will be useful once you retire.
Individuals over 50 with IRA accounts will continue to have a $1,000 catch-up contribution limit in 2025. Another fascinating aspect of IRA is the following.
The IRS has extended the income levels for calculating eligibility to make deductible contributions to regular IRAs, Roth IRAs, and claim the Saver’s Credit for next year.