New 401(k) Contribution Limits for 2025: A Boost for Retirement Savers

Posted on Nov 8, 2024

The IRS has announced new contribution limits for 401(k) plans in 2025, offering savers an opportunity to boost their retirement funds. Starting in 2025, employees will be able to contribute up to $23,500 to their 401(k) plans: a $500 increase from the 2024 limit of $23,000. This increase is part of the IRS’s annual cost-of-living adjustments, applying to not only 401(k) plans but also 403(b), most 457 plans, and the federal government's Thrift Savings Plan.

For those aged 50 and older, the standard catch-up contribution remains steady at $7,500, allowing these individuals to contribute up to $31,000 in 2025. However, the SECURE 2.0 Act introduces a significant change for people ages 60 to 63. Beginning in 2025, employees reaching ages 60, 61, 62, or 63 during the calendar year will be eligible for an "enhanced catch-up" contribution of $11,250. This “super catch-up” provision raises the maximum annual contribution for these employees to $34,750, combining the standard contribution limit with the enhanced catch-up.

In addition to these individual limits, the IRS has raised the total contribution cap for 401(k) plans, which includes both employee and employer contributions. In 2025, this combined limit will rise to $70,000, up from $69,000 in 2024. This provides both employees and employers more room to maximize retirement savings.

The increased limits are particularly advantageous for employees approaching retirement, as they offer a valuable opportunity to strengthen tax-advantaged savings and improve financial security in later years.

As always, individuals should consult with financial advisors to determine the best strategy for their unique circumstances.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.