Confidence in Tax Rates: New Retirement Plan Contributions Limits for 2025
This week’s insight looks at the new retirement plan contribution limits for 2025 and why you should have a bit more confidence about where tax rates may go.
It’s obviously been a hectic few weeks on the political front. The re-election of Donald Trump and all the news (noise?) around his political appointments have clouded what should be a more optimistic outlook on the tax front. For high earners, the red wave almost certainly means the 2017 Tax Cuts and Jobs Act (TCJA) will be extended with few adjustments. That means income tax rates aren’t going up any time soon, which presents an opportunity for folks saving for retirement. There’s a double bonus too.
Starting next year, workers aged 60 to 63 can contribute much more to their workplace retirement accounts, in addition to their IRAs. If you fall in that window and are still working, then you may have the opportunity to pour in an additional $11,250 compared to other workers, bringing a total contribution amount to $34,750 for 401(k)s or similar plans.
Since there’s scant chance that tax rates in the near term are going up, it could make sense to take advantage of that bulked-up limit via pre-tax contributions – if you are in a high marginal income tax bracket. For those in, say, the 24% bracket or lower, then choosing the Roth option could be the savvy play.
For younger savers and investors, the outlook is less certain. Massive annual budget deficits and a national debt that’s now more than $36 trillion augur for higher tax rates (particularly among high earners) in the decades ahead. At the very least, having some so-called “tax diversification” concerning your retirement accounts (some Roth, some pre-tax, some after-tax, and even your HSA) is probably the right approach.
For small business owners, the combined employee and employer retirement plan contribution limit inches up from $69,000 to $70,000. One last nugget – the Social Security cost-of-living adjustment is 2.5% for 2025, so retirees who have already claimed benefits can expect a modest bump this January.
Retirement Plan Contribution Limits
Plan/Limit Type | 2025 Contribution Limit | 2024 Contribution Limit | Additional Notes |
401(k), 403(b), Governmental 457, TSP | $23,500 | $23,000 | Annual contribution limit for employees. |
Catch-Up Contribution (Age 50+) | $7,500 | $7,500 | Total limit for those 50+ is $31,000 in 2025. |
Enhanced Catch-Up (Ages 60–63) | $11,250 | N/A | New SECURE 2.0 provision for 401(k), 403(b), 457, and TSP. |
Traditional IRA Contribution Limit | $7,000 | $7,000 | No change from 2024. |
IRA Catch-Up (Age 50+) | $1,000 | $1,000 | Unchanged, adjusted for inflation starting 2026. |
Roth IRA Contribution Phase-Out (Single/HoH) | $150,000–$165,000 | $146,000–$161,000 | Phase-out based on modified AGI. |
Roth IRA Contribution Phase-Out (Married Joint) | $236,000–$246,000 | $230,000–$240,000 | Phase-out based on modified AGI. |
Saver’s Credit Income Limit (Married Joint) | $79,000 | $76,500 | Income limit for low/moderate-income taxpayers. |
Saver’s Credit Income Limit (Heads of Household) | $59,250 | $57,375 | |
Saver’s Credit Income Limit (Single) | $39,500 | $38,250 | |
SIMPLE IRA Contribution Limit | $16,500 | $16,000 | |
SIMPLE IRA Enhanced Contribution (Certain Plans) | $17,600 | $17,600 | Applicable to certain SIMPLE plans. |
SIMPLE IRA Catch-Up (Age 50+) | $3,500 | $3,500 | Unchanged for most SIMPLE plans. |
SIMPLE IRA Enhanced Catch-Up (Age 60–63) | $5,250 | N/A | Higher limit under SECURE 2.0 for applicable SIMPLE plans. |
IRA Deduction Phase-Out (Single) | $79,000–$89,000 | $77,000–$87,000 | Phase-out based on modified AGI for taxpayers covered by a workplace retirement plan. |
IRA Deduction Phase-Out (Married Joint) | $126,000–$146,000 | $123,000–$143,000 | Phase-out applies to spouse covered by a workplace plan. |
IRA Deduction Phase-Out (Non-Covered Spouse) | $236,000–$246,000 | $230,000–$240,000 | Applicable when one spouse is covered by a workplace plan. |
IRA Deduction Phase-Out (Married Separate) | $0–$10,000 | $0–$10,000 | No annual cost-of-living adjustment applies. |
Source: IRS
