The IRS Just Announced 2025’s IRA and 401(k) Contribution Limits. Here’s What You Need to Know

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Want to know how much you can save in a tax-advantaged retirement account in 2025? Here’s the latest. [[{“value”:”

Did you know that the average retired worker on Social Security only collects about $23,000 a year? That’s not a whole lot of money to live on, especially when you consider that the typical 65-year-old today might spend a whopping $165,000 on healthcare throughout retirement, according to Fidelity.

For this reason, it’s important to save for retirement as best as you can. And it’s a great idea to use tax-advantaged savings plans like IRAs and 401(k)s to do that.

Both traditional IRAs and 401(k)s give you a tax break on the money you put in. Plus, investment gains are tax-deferred. So unlike a regular brokerage account, where you might have to pay taxes on capital gains every year, with an IRA or 401(k), you don’t pay taxes on gains until you take withdrawals.

Every year, the amount of money you’re allowed to contribute to an IRA or 401(k) can change. And the IRS just announced 2025’s contribution limits. Here’s what you need to know.

401(k) limits for 2025

In 2025, you’ll be able to contribute up to $23,500 to your 401(k) if you’re under the age of 50. That’s a $500 increase from 2024.

If you’re 50 or older, you’re allowed to make a catch-up contribution in your 401(k). And don’t be fooled by the terminology here. You don’t need to be “behind” on retirement savings to be eligible for a catch-up contribution. You just need to be at least 50, or turn 50 by the time 2025 comes to an end.

In 2025, the catch-up contribution limit for 401(k)s is $7,500, unchanged from 2024. So if you’re 50 or older by the end of 2025, you can put up to $31,000 into your 401(k).

IRA limits for 2025

In 2024, you’re allowed to contribute up to $7,000 to an IRA if you’re under 50. In 2025, that’s not changing.

Similarly, the $1,000 catch-up contribution limit for participants 50 and older is staying the same. So if you’re in that age bracket, you’re limited to $8,000 in 2025.

If you don’t have access to a retirement savings plan through your employer, you can open an IRA at any financial institution that offers them and manage that account yourself. Click here for a list of the best IRAs for your retirement savings.

Try to contribute as much as you can in 2025

No matter your age, maxing out a 401(k) in 2025 is a pretty tall order. And even though the contribution limits for IRAs are much lower, it’s still not easy to part with $7,000 or $8,000 in a single year.

But you should definitely make an effort to contribute as much money as possible to your retirement plan in the new year. At the start of the new year (or right before), set up a budget that makes room for IRA or 401(k) contributions, and then put those contributions on autopilot so you stay on track.

If you have a 401(k), your contributions will be deducted from your paychecks automatically. But with an IRA, you’ll generally need to go in and set up an automatic transfer from a bank account.

To give you an idea of how much you stand to gain by funding your retirement account generously in 2025, let’s say you’re able to contribute $5,000. That’s below the maximum for both IRAs and 401(k), but it’s still a sizable contribution.

Over the past 50 years, the S&P 500’s average annual return has been 10%. If you earn that same yearly return in your IRA or 401(k), then in 35 years, your $5,000 will be worth a little more than $140,000.

Remember, too, that you can always start out making smaller IRA or 401(k) contributions in 2025 and increase them during the year as you’re able to. So if you end up finding a side gig or getting a raise, take the opportunity to pad your retirement savings. It could do you a world of good in the long run.

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