Employees can contribute even more to their 401(k) plans in the upcoming year. Adjusted for the cost of living, effective Jan. 1, 2025, employees can contribute up to $23,500 into their 401(k) and 403(b) plans, most 457 plans and the Thrift Savings Plan for federal employees. This is a $500 jump from the $23,000 limit in 2024.

The catch-up contribution limit for employees ages 50 and older, will remain at $7,500, the same amount as 2024. However, starting in 2025, employees ages 60 to 63 who participate in those work plans have a higher catch-up contribution limit—$11,250, instead of $7,500.

The limit on combined employer and employee contributions to defined contribution plans will increase to $70,000 in 2025, up from $69,000 in 2024. While the announcement comes after many organizations have already begun open enrollment for next year, employers should still communicate this update to employees now and throughout the upcoming year. Employees generally have the flexibility to adjust their retirement contribution rates year-round, though some employers set limits on how frequently changes can be made. Despite annual increases in 401(k) contribution limits, most employees don’t reach them.

Defined Benefit Plan Limits

Defined benefit plan limits for 2025 was also included in the announcement. Effective Jan. 1, 2025, the maximum annual benefit that may be provided through a defined benefit plan is $280,000, up from $275,000 in 2024. For a participant who separated from service prior to Jan. 1, 2025, the participants limitation under a defined benefit plan under section 415(b)(1)(B) is calculated by multiplying the participant’s compensation limitation, as adjusted through 2024, by 1.0262.

IRA Limits and Savers Credits

In 2025, the annual contribution limit for IRAs remains at $7,000, with the catch-up contribution limit for individuals aged 50 and older is also holding steady at $1,000. For individual taxpayers covered by a workplace retirement plan, the income range for the tax deduction phase-out on traditional IRA contributions will increase to $79,000–$89,000, up from $77,000–$87,000 in 2024. For married couples filing jointly, the phase-out range will rise to $126,000–$146,000—a $3,000 increase over last year.

The income phase-out range for Roth IRA contributions in 2025 will increase to $150,000–$165,000 for individuals and heads of households, up from $146,000–$161,000. For married couples filing jointly, the range rises by $6,000 to $236,000–$246,000.

The Saver’s Credit, also known as the Retirement Savings Contributions Credit, will also see increases for low- and moderate-income workers. The new limits will be $39,500 for individuals (up from $38,250 in 2024), $79,000 for married couples filing jointly (up from $76,500), and $59,250 for heads of household (up from $57,375).

How We Can Help

Employers should take the time to communicate this information to their employees so they can make the appropriate adjustments to their paycheck withholdings. This bump to the contribution limits allows employees to save more for retirement than ever before.

We offer 401(k) 360 integration, which allows our systems to directly integrate with many of the major recordkeeping platforms. This provides seamless data sharing between systems to eliminate frustrating data submissions and expedite plan deposits, as well as year-end compliance requirements. Contact us today to learn more about how our 401(k) 360 integration works.