401(k) Contribution Limits for 2025

With the start of a new year comes new retirement plan contribution limits released by the IRS. For 2025, you’ll see an increase in 401(k) contributions, updates to cost-of-living adjustments, catch-up contributions, and phase-out ranges. This guide will break everything down so you’ll understand what you can expect this plan year.

Key Takeaways:

• 2025 brings a higher contribution limit of $23,500 for 401(k) plans.
• You’ll also see higher catch-up contributions.
• A new catch-up contribution limit has been put in place for those age 60-63.
• Phase-out ranges for IRA contribution deductibility have increased.

2025 401(k) and IRA contribution limits:

This year, 401(k) participants can contribute up to $23,500. This is an increase from last year’s $23,000. For individuals contributing to an IRA, the contribution amount remains at $7,000.

2025 catch-up contribution limits:

The catch-up contribution limit for 401(k) participants aged 50 and over remains at $7,500. Additionally, updates to the SECURE Act 2.0 allow for a higher catch-up contribution limit for participants aged 60, 61, 62 and 63. This limit is $11,250 in 2025.

For employees aged 50 or older, the catch-up contribution limit for most SIMPLE accounts remains at $3,500. The SECURE Act 2.0 also allows participants aged 60, 61,62, and 63 to have a higher catch-up contribution limit of $5,250 for SIMPLE accounts. Note that for employers with less than 25 employees, there is an optional 10% increase for both the regular SIMPLE contribution limit and the catch-up. 

2025 Phase-out ranges:

Taxpayers not enrolled in a workplace retirement plan can deduct IRA contributions from their taxable income as long as they satisfy certain income conditions, as determined by the filers modified adjusted gross income, or MAGI. This deduction may be reduced, phased out, or eliminated if the taxpayer or their spouse was covered by a workplace retirement plan during the filing year.

The phase-outs don’t apply if both the taxpayer and their spouse are not covered by a retirement plan at work. The phase-out ranges are as follows:

• For single taxpayers, the phase-out range is between $79,000 and $89,000, increased from between $77,000 and $87,000
• For married couples filing jointly with one or both spouse(s) enrolled in a workplace retirement plan, the phase-out range is $126,000 and $146,000, an increase from between $123,000 and $143,000.
• For a taxpayer who contributes to an IRA who is not covered by a retirement plan and is married to someone who is covered by a retirement plan, the phase-out range is between $236,000 and $246,000. This is an increase from $230,000 and $240,000.
• For a married taxpayer filing separately and covered by a retirement plan, the phase-out range remains between $0 and $10,000 and is not affected by cost-of-living adjustments.

Individuals seeking to contribute to a ROTH IRA are limited to certain income levels.

• For single or head-of-household taxpayers who contribute to a ROTH IRA, the phase-out range is $150,000 and $165,000, increased from $146,000 and $161,000.
• The phase-out range is $236,000 and $246,000 for those who are married and filing jointly. This is an increase from $230,000 and $240,000.

2025 cost-of-living adjustments

The IRS sets limits for contributions to certain qualified retirement plans. These limits have been adjusted for the cost of living. The following are a few of these cost-of-living adjustments.

• Annual compensation limits have risen from $345,000 to $350,000.
• For highly compensated employees the limit is up from $155,000 to $160,000.
• For key employees, the threshold is increased from $220,000 to $230,000.
• The limits for elective contributions to a starter 401(k) deferral-only plan remain at $6,000
• For those who turn 50 before the end of the taxable year, the catch-up limit for the starter 401(k) has increased to $7,000.

Conclusion:

Each year, the IRS releases retirement plan updates. Keeping up with this information is vital to ensuring that your plan remains compliant, and your plan participants understand their contribution limits.