Inflation is still sticking around this year. The good news is that in 2025 you will be able to put more money away in your 401(k). The IRS released the contribution and tax-deferral limits for 401(k) plans, IRAs, and other retirement accounts for 2025. Changes are based on the U.S. cost of living increases, and there are notable changes for those saving in 401(k) accounts.
401(k) employee contribution limits increase in 2025 to $23,500 from $23,000 in 2024. Those over 50 years of age can still make the same catch-up contributions of $7,500 per year (that's up to $31,000 per year in total excluding any employer match) to their 401(k) accounts. Most 401(k)s allow Roth 401(k) contributions. Employees may choose to put some, none, or all contributions into the Roth 401(k) or tax-deferred option. Separately, IRA limits remained at $7,000, and IRA catch-up limits remained at $1,000.
The Total Amount You Can Defer Into a 401(k) is Increased to $70,000
Another 401(k) area of import that changed is the amount you can contribute and receive in total to your 401(k) account. If you receive company matching contributions or profit sharing, the all-in limit has been increased from $69,000 to $70,000 for 2025 with those over 50 years able to put in $77,500 with the catch-up. Those aged 60-63 will be able to put in $81,250 with the new catch-up provision. Here is a summary of the 2025 401(k) limits as compared to 2024:
| 401(k) Limits for 2025 | ||
|---|---|---|
| 2025 | 2024 | |
| Employee contribution limit | $23,500 | $23,000 |
| Annual limit per individual | $70,000 | $69,000 |
| Age 50+ catch-up amount | $7,500 | $7,500 |
| Age 60-63 catch-up amount | $11,250 | N/A |
| Annual compensation limit | $350,000 | $345,000 |
| Highly compensated employees | $160,000 | $155,000 |
401(k) Saving Advantages Over Traditional IRAs Are Significant
The tax advantages for 401(k) savers versus those opting to use IRAs, or those who don't have access to a 401(k) plan, is now even larger.
| 401(k) Advantages Over Traditional IRAs in 2025 | ||
|---|---|---|
| 401(k) | IRA | |
| Annual limit per individual | $70,000 (employee + employer contributions) |
$7,000 |
| Age 50+ catch-up amount | $7,500 | $1,000 |
| Age 60-63 catch-up amount | $11,250 | N/A |
| Roth income limit | None | $165K* |
| Penalty-free access, if needed | Yes, via a loan** | No |
*Beginning at $150K, the amount you are allowed to contribute begins to decrease, hitting $0 at $165K for singles (range is $236K to $246K for married couples filing jointly)
**Loan balances must be paid off in five years and if you leave your job, you may be required to pay back the full balance within a short-time frame or pay penalties and taxes. Most important, borrowing from your 401(k) can significantly reduce your retirement savings.
Along with the 2025 IRA contribution limit increase, you can earn more in 2025 and are able to deduct your IRA contributions. The phase out income limits for contributing to a Roth IRA increased from 2024 depending on your filing status.
Refer to IRS announcement and notice for 2025 for more details.