Life today is expensive, and contributing to a retirement plan is more beneficial than ever. Often, the IRS raises contribution limits annually, such as the contribution limit for 401(k)s increasing to $23,500 for 2025 from $23,000 in 2024. In a world where pensions are nearly gone, having the ability to put more money away can help you prepare for a retirement that may be here faster than you think.i
According to the Investment Company Institute, Americans had more than $9.3 trillion in 401(k)s and $18 trillion in individual retirement accounts (IRAs) in 2025.ii Gallup estimates that in 2025, around 59% of Americans have a savings plan.iii
Specified retirement plans: 401(k), 403(b), 457, and Thrift Savings Plan
If you are somebody who is building not only a 401(k) but a 403(b), one of several 457 plans, or you are eligible for the federal government’s Thrift Savings Plan, the limit on elective deferrals for 2025 is $23,500.
For individuals age 50 or older, you will be allowed a “catch-up contribution,” an additional $8,000 for a total of $31,500.
If you save using a Roth or traditional IRA
IRA contribution limits for 2025 remain at $7,000 ($8,000 for those age 50 or older).
A Roth IRA requires you to pay income tax on your contributions the year you make them, but any withdrawals at retirement or before retirement (if eligible) will be tax-free. The rules are as follows:
If you are single taxpayers covered by a workplace retirement plan, the phase-out range is between $79,000 and $89,000.
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range between $126,000 and $146,000 for 2025.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is between $236,000 and $246,000 for 2025.
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If your income is too high and you can’t contribute to a Roth IRA, there is a way around that called a backdoor Roth IRA. To do this, you have to put money into a traditional IRA and then convert the account to a Roth IRA.
Are you eligible for the Retirement Savings Contributions Credit (Saver’s Credit)?
Low- and moderate-income households may get help from the saver’s credit, which pays up to $1,000 for individuals and up to $2,000 for married couples, depending on income and contribution amounts.
2025 Saver’s Credit Income Limits are as follows:
Credit Amount Single Joint Filers
50% of contribution AGI of $23,750 or less AGI of $47,500 or less
20% of contribution $23,751 - $25,500 $47501 - $51,000
10% of contribution $25,501 - $39,500 $51,001 - $79,000
0% of contribution more than $39,500 more than $79,000v
Other contribution and cost-of-living adjusted limits for 2025 include:
SIMPLE Retirement Accounts Limit:
Under age 50: $17,000
Those age 50 to 59 or age 65 and older can save an addition $3,500 as a catch-up contribution.
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Defined Benefit Plan Limit:
The limitation on the annual benefit under a defined benefit plan is $280,000 for 2025.
Defined Contribution Plan Limit:
The total contribution limit for employee and employer contributions to 401(k) defined contribution plans has increased to $70,000 for 2025.
Never too early to plan ahead
Staying up-to-date on changes to contribution limits could benefit you and your retirement strategy. Schedule a consultation with your financial professional and see how these new changes could impact your financial goals.
Important Disclosures:
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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