Trump donor Norm Champ details how Biden-Harris regulations hurt Americans’ retirement funds in “The Bottom Line.”
It’s officially 2025 and it’s a good time to re-evaluate your retirement planning.
THE Internal Revenue Service (IRS), in November, announced it had increased the amount individuals can contribute to their 401(k) and other retirement plans to account for inflation.
Each year, the IRS reviews the tax thresholds and limitations for various retirement accounts and considers making a cost of living adjustment based on the impact of inflation since the previous change.
For tax year 2025, the IRS is increasing the annual contribution limit for 401(k) plans of $500, going from the current limit of $23,000 in 2024 to $23,500 in 2025.
These limits also apply to several other retirement plans and will see the same increase for fiscal year 2025, including 403(b) retirement plans, government 457 plans, and the Federal Government Thrift Savings Plan .
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The IRS has increased contribution limits and catch-up contribution thresholds for 401(k) plans and similar retirement accounts. (Reuters photos / Reuters)
The IRS is also considering adjustments to contribution limits for individual retirement accounts (IRAs), including Traditional and Roth IRAs. However, the IRS will keep annual IRA contribution limits constant from 2024 to 2025 at $7,000. It also keeps the IRA catch-up contribution limit for people age 50 and older at $1,000 for 2025.
The catch-up contribution limit that applies to employees age 50 and older enrolled in most 401(k), 403(b), government 457 plans and Savings Savings Plan will remain at $7,500 for 2025. Workers 50 and older can generally contribute up to $31,000 per year to these retirement plans starting in 2025, as part of changes made with the enactment of the SECURE 2.0 Act of 2022.
YELLEN ALL IRS ENFORCEMENT AS HELPING REDUCE BUDGET DEFICIT
This law also created a higher catch-up contribution limit for workers aged 60 to 63 who participate in these plans – which will increase to $11,250 from $7,500 in 2025.
The IRS also adjusted the thresholds below which taxpayers can contribute to a traditional IRA and receive a tax deduction for their contribution.
The IRS kept the contribution limits for IRAs stable, but increased the deduction phase-out range for traditional IRAs and the contribution phase-out range for Roth IRAs. (J. David Ake/Getty Images / Getty Images)
For individual taxpayers who are also covered by a workplace retirement plan, the traditional tax-free range for IRA contributions is increased to between $79,000 and $89,000, up from $77,000 and $87,000. For married couples filing joint tax returns, the phase-out range is between $126,000 and $146,000, an increase of $3,000 from last year.
The income phase-out range for taxpayers contributing to a Roth IRA increased from $150,000 to $165,000 for individuals and heads of household, up from $146,000 to $161,000. For married couples filing jointly, the phase-out range increases by $6,000 to between $236,000 and $246,000.
The IRS reviews and potentially updates the contribution and eligibility thresholds for retirement accounts such as 401(k)s and IRAs annually to adjust for inflation. (iStock/iStock)
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THE Saver creditalso known as the Retirement Savings Contribution Credit, for low- and moderate-income workers, is $39,500 for individuals, $79,000 for married couples filing jointly, and $59,250 $ for heads of household.
This article was originally published on November 1, 2024.
