The IRS has increased the amount that individuals can contribute to their employer-sponsored 401(k) plans next year to $23,500, an increase of $500 from 2024.
The $23,500 cap also applies to 403(b) plans, governmental 457 plans and the Thrift Savings Plan. However, employees 50 and older are permitted to make catch-up contribution of up to $7,500 that raises the total annual amount they can invest toward retirement to $31,000.
Additionally, the agency noted that a SECURE 2.0 Act of 2022 provision that takes effect next year allows employees ages 60 to 63 who participate in certain employer-sponsored plans to make even higher “super catch-up” contributions. Those employees aged 60, 61, 62 and 63 can make up to $11,250 in contributions, instead of $7,500.
The IRS did not change the annual cap for non-employer individual retirement accounts (IRAs), which remains at $7,000 for 2025. IRA plans also allow catch‑up contributions for individuals aged 50 and over, which remains at $1,000 for 2025, for a total of $8,000.
The employee contribution limit has also been increased by $500 for SIMPLE (Savings Incentive Match Plan for Employees) IRA plans, which allow small businesses which do not offer 401(k) plans to also contribute to IRAs. The amount that individuals can contribute to their SIMPLE retirement accounts will increase to $16,500 in 2025. The catch-up contribution limit for employees 50 and over who participate in SIMPLE IRA plans remains an additional $3,500.
The technical guidance regarding all cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2025 is contained in Notice 2024-80 PDF, posted Nov. 1 on the agency’s website, IRS.gov.
