The Internal Revenue Service (IRS) has announced an increase in the contribution limit for individuals participating in employer-sponsored 401(k) plans. For the year 2025, the cap will rise to $23,500, which is a $500 increase from the previous year.
This new limit also applies to 403(b) plans, governmental 457 plans, and the Thrift Savings Plan. Employees aged 50 and older are allowed to make catch-up contributions of up to $7,500. This provision enables them to invest a total of $31,000 annually towards retirement.
A provision from the SECURE 2.0 Act of 2022 will take effect next year, allowing employees aged between 60 and 63 to make "super catch-up" contributions. These employees can contribute up to $11,250 instead of the standard $7,500.
The IRS has not altered the annual cap for non-employer individual retirement accounts (IRAs), which remains at $7,000 for 2025. Individuals aged 50 and over can still make catch-up contributions of $1,000, bringing their total possible IRA contribution to $8,000.
Additionally, there is a $500 increase in the employee contribution limit for SIMPLE IRA plans—designed for small businesses without access to 401(k) plans—raising it to $16,500 in 2025. The catch-up contribution limit for those aged 50 and over remains at an additional $3,500.
All details regarding cost-of-living adjustments affecting dollar limitations on pension plans and other retirement-related items for tax year 2025 are included in Notice 2024-80 PDF available on IRS.gov as of November 1st.
