By 2025, Americans will be able to save even more money in their workplace retirement plans before taxes.
The IRS on Friday increased the annual forbearance limit for employees from $23,000 in 2024 to $23,500 for workplace plans, including 401(k)s, 403(b)s, government 457 plans, and federal thrift savings plans. It was announced that it would be raised to US dollar. Additional contributions for participants age 50 and older will remain at $7,500, capping total contributions in 2025 at $31,000.
According to Vanguard’s How America Saves report, only 14% of employees maxed out their work plans in 2023. In plans that offered catch-up contributions, 15% of participants aged 50 and older made more contributions.
From 2025, catch-up contribution limits will increase for employees aged 60 to 63 who participate in one of these work plans. That cap is $11,250 instead of $7,500.
“Once you reach age 64, you are no longer eligible for super catch-up contributions and are limited to your normal catch-up contributions,” said Richard Pong, a certified public accountant in San Francisco, California.
But remember: “At present, there is technically no law that requires employers to provide super catch-up contributions, so there is a need to amend employer retirement plans to specifically allow for super catch-up contributions. I think there is.”
What are the IRA limits for 2025?
The annual contribution limit to an IRA remains $7,000. The IRA catch-up contribution limit for individuals age 50 will also remain at $1,000 in 2025, after adjusting for cost of living, the IRS said.
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Have the income ranges for contributions to traditional and Roth IRAs changed?
Yes, the IRS said the income ranges are for determining eligibility for deductible contributions to traditional IRAs, contributions to Roth IRAs, and claiming the increased Saver’s Credit in 2025. Ta.
The scope of the 2025 phase-out is:
For single taxpayers eligible for a workplace retirement plan, the phaseout range increased from $77,000 to $87,000 to $79,000 to $89,000. For married couples filing jointly, the phase-out range is $123,000 to $143,000, and $126,000 to $146,000 if the spouse making the IRA contribution is covered by a workplace retirement plan. increased to dollars. For IRA contributors who are not covered by a workplace retirement plan and are married to a covered person, the phaseout ranges from $230,000 to $240,000 and from $236,000 to $246,000. Masu. For married individuals eligible for workplace retirement benefits who file separate returns, the plan states that the phase-out range remains between $0 and $10,000, not subject to annual cost-of-living adjustments. The income phase-out range for taxpayers contributing to a Roth IRA is $150,000 to $165,000 for singles and heads of households. , increased from $146,000 to $161,000. For married couples filing jointly, the graduated deduction range increased from $230,000 to $240,000 to $236,000 to $246,000. The phaseout range for married individuals who contribute to a Roth IRA and file a separate return is not subject to annual cost-of-living adjustments and remains between $0 and $10,000. The income limit for the Savers Credit (also known as the Retirement Savings Contribution Credit for low- and moderate-income workers) is $79,000 for married couples filing jointly, up from $76,500. For heads of household, the amount increases from $57,375 to $59,255. The amount increases from $38,250 to $39,500 for single and married people filing separately.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday to Friday morning.
