Good news! The IRS has increased the employee contribution limit for 401(k) and other retirement plans for 2025.
The contribution limit has been increased from $23,000 (2024) to $23,500 (2025) for employees participating in the following types of employer-sponsored retirement plans:
While the annual catch-up contribution limit has not increased this year, here’s a reminder that employees ages 50 and over have an opportunity to make catch up contributions up to $7,500 to these types of plans. And, as a result of the SECURE 2.0 Act, an exciting “super catch-up” opportunity is available in 2025 for those employees who are ages 60-63. The new catch-up limit allows this age group to make catch-up contributions of up to $11,250 instead of $7,500. Important to note, starting in 2026, if you earn more than $145,000 in the prior calendar year, all catch-up contributions at age 50 or older will need to be made to a Roth account in after-tax dollars.[1]
In summary, employees who are 50-59 or 64 or older can contribute a total of $31,000 of their own money into the above-mentioned retirement plans in 2025, while employees who are 60-63 can contribute up to $34,750.
If your goal is to maximize your contributions to your employer-sponsored retirement plan, a good rule of thumb is to confirm at the start of each new year that your payroll contributions will continue to reach the IRS
contribution limit. When setting your contribution elections, some plans will offer the option to “maximize.” This means your contributions will be evenly deducted from your paychecks for each pay period throughout the calendar year up to that year’s IRS contribution limits. This can make it easier to ensure you are maximizing contributions rather than having to remember to adjust your contribution percentage each year so that you reach the limit. However, for plans that do not offer a “maximize” option, you may need to speak to a Human Resources/Payroll representative at work to manually adjust your payroll deductions so that you reach the contribution limit by the end of the year.
The limit on annual contributions to IRAs did not increase for 2025. The IRA contribution limit for both traditional and Roth IRAs remains at $7,000 for individuals who are under age 50 and $8,000 for those aged 50 and above. Please note, these amounts are a combined maximum across all personal IRAs.
IRAs are a good retirement savings vehicle for individuals looking to maximize their tax-deferred retirement savings, however they do have some restrictions and conditions. For more information, visit the IRS website.
When it comes to your entire financial landscape, there are other important factors that should be considered, including contribution type (pre-tax, Roth, after-tax) and eligibility for tax-deductible contributions. Your financial advisor can explain the nuanced rules and various options and help you to determine how much you should contribute to retirement plans or IRAs based on how they fit in with your retirement goals and your overall financial plan.
At Modera, we want to be sure you’re up to date on all the financial legislation that could affect you. If you have any questions or concerns, please reach out to your advisory team to discuss.
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