401(k) contribution limits 2025: In 2025, there are updated contribution limits for retirement savings that allow individuals to save more for the future. These changes aim to help people build a stronger retirement fund, especially for those who may feel behind in their planning.
401(k) Contribution Limit 2025
For 2025, the maximum amount you can contribute to a 401(k) plan is $23,500, an increase from $23,000 in 2024. This allows individuals to save more for retirement.
If you are 50 years or older, you can make catch-up contributions of $7,500, bringing your total contribution for the year to $31,000. This extra allowance is designed to help those closer to retirement age boost their savings.
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Under the SECURE 2.0 Act, workers aged 60 to 63 have a new benefit: they can contribute an additional $11,250 in catch-up contributions. This raises their total contribution limit for the year to $34,750. This special provision is aimed at helping workers who are closer to retirement maximize their retirement savings.
The contribution limit for IRAs remains the same at $7,000 for 2025. However, there are changes to the income phase-out ranges for both traditional IRAs and Roth IRAs.
Traditional IRA Phase-Out Ranges
- For single taxpayers, the deduction phase-out starts at $79,000, an increase from $77,000.
- For married couples filing jointly, the phase-out for contributing spouses starts at $126,000, up from $123,000.
Roth IRA Phase-Out Ranges
- For single taxpayers, the phase-out range is now $150,000 to $165,000.
- For married couples filing jointly, the phase-out range is now $236,000 to $246,000.
These updates make it easier for more individuals to contribute to their IRAs and take advantage of the tax benefits.
How can you save more?
Maximizing Your Contributions
Experts suggest that it’s a good idea to adjust your contributions early in the year to spread them out across more pay periods. This can help ensure you maximize your contributions without having to catch up later.
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Be Proactive with Investments
Catherine Valega, a certified financial planner, advises being aggressive with your investments, particularly if you have decades before retirement. Taking this approach helps you make the most of the higher contribution limits and the potential growth of your investments.
The Importance of an Emergency Fund
While contributing to retirement accounts is important, it’s also crucial to maintain an emergency fund. George Gagliardi, a financial planner, highlights the importance of having three to six months of living expenses saved for unexpected situations. An emergency fund ensures you have financial stability in case of unforeseen events, allowing you to focus on long-term retirement planning without immediate financial concerns.
Review Your Retirement Plan
With the updated contribution limits and income phase-out ranges in 2025, now is a great time to review your retirement plan. Whether you’re just starting or nearing retirement, adjusting your contributions can help ensure that you stay on track to meet your retirement goals. Taking advantage of the updated rules is a smart way to optimize your savings strategy.
Act early
To make the most of these updated contribution limits, it is important to act early. By adjusting your contributions to the maximum allowed amount and spreading them across the year, you can make the most of these changes and build a solid foundation for your retirement.
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