Trump donor Norm Champ details how the Biden-Harris regulations are hurting Americans' retirement funds on 'The Bottom Line.'
It's officially 2025, and it's a good time to rethink your retirement planning.
The Internal Revenue Service (IRS), announced in November that it increased the amount individuals can contribute to their 401(k) and other retirement plans to account for inflation.
Each year, the IRS reviews the tax thresholds and limits for various retirement accounts and considers making a cost-of-living adjustment based on the impact of inflation since the previous change.
For the 2025 tax year, the IRS is increasing the annual contribution limit 401(k) plans by $500 from the current limit of $23,000 in 2024 to $23,500 in 2025.
These limits also apply to several other retirement plans and will undergo the same increase for the 2025 tax year, including 403(b) retirement plans, government 457 plans, and the federal government savings plan.
IRS SETS NEW TAX FINALS, RAISES STANDARD DEDUCTION FOR 2025
The IRS has increased contribution limits and catch-up contribution limits for 401(k) plans and similar retirement accounts. (Photo by Reuters / Reuters)
The IRS is also considering adjustments to contribution limits for Individual Retirement Accounts (IRAs), including traditional and Roth IRAs. However, the IRS will keep annual IRA contribution limits constant from 2024 to 2025 at $7,000. It also maintains the catch-up IRA contribution limit for individuals age 50 and older at $1,000 for 2025.
Catch-up contribution limit that applies to employees age 50 and older enrolled in most 401(k), 403(b), government 457 plans, and Savings Savings Plan it will remain at $7,500 for 2025. Workers who are 50 or older can generally contribute up to $31,000 per year to these pension plans starting in 2025 under changes made with the enactment of the SECURE 2.0 Act of 2022.
YELLEN TOUTS IRS ENFORCEMENT TO HELP CLOSE BUDGET DEFICIT
The bill also created a higher catch-up contribution limit for workers ages 60 to 63 participating in these plans β which will increase to $11,250 in 2025, up from $7,500.
The IRS has also adjusted the thresholds below which taxpayers can contribute to a traditional IRA and receive a tax deduction for their contribution.
The IRS kept IRA contribution limits steady, but increased the phaseout scope for traditional IRAs and the phaseout scope for Roth IRAs. (J. David Ake/Getty Images/Getty Images)
For individual taxpayers who also have a workplace retirement plan, the traditional IRA phase-out range increases to $79,000 to $89,000 β from $77,000 to $87,000. For married couples filing a joint tax return, the phase-out range increases to $126,000 to $146,000, an increase of $3,000 from last year.
The income exclusion range for taxpayers who contribute to a Roth IRA increased to $150,000 to $165,000 for individuals and heads of households β up from $146,000 to $161,000. For married couples filing jointly, the exclusion range increases by $6,000 to $236,000 to $246,000.
Each year, the IRS reviews and possibly updates the contribution and eligibility limits for retirement accounts such as 401(k)s and IRAs to adjust for inflation. (iStock/iStock)
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The Savings creditalso known as the retirement savings allowance, for low- and moderate-income workers it is $39,500 for individuals, $79,000 for married couples filing jointly, and $59,250 for heads of household.
This article was originally published on November 1, 2024.
