As we move through 2025, it’s essential to stay informed about the annual changes to retirement and health savings accounts (HSAs), as they directly affect how much you can save for the future. Here’s a breakdown of what’s new, and how it might benefit you.
1. 401(k), 403(b), and Other Employer-Sponsored Retirement Plans
For 2025, the IRS has raised the contribution limit for employees who contribute to 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan (TSP). Here’s the breakdown:
Contribution Limit:
The limit for employee elective deferrals is now $23,500, up from $23,000 in 2024.
Catch-up Contributions:
If you’re 50 or older, you can contribute an additional $7,500, bringing the total for those 50+ to $31,000.
New Extended Catch-Up:
Those who are between 60 and 63 years old can take advantage of a new extended catch-up contribution in 2025. Instead of the $7,500 for those 50+, individuals who are 60, 61, 62 or 63 can contribute a catch-up of up to $11,250. Make sure your plan allows this, as it is optional for plan sponsors to implement.
2. Individual Retirement Accounts (IRAs)
For IRA contributions, the IRS made no changes in 2025.
- Traditional and Roth IRA Contribution Limit: You can contribute up to $7,000 if you’re under 50. This number is unchanged from 2024. Note: $7,000 is the total amount you can contribute across IRA’s, meaning you can’t contribute $7,000 to a Roth AND $7,000 to a Traditional IRA.
- Catch-up Contributions: For those aged 50 and over, the catch-up limit is $1,000, bringing the total contribution limit to $8,000.
- Although the contribution limits for 2025 didn’t change, the income phase-outs did. For 2025, individuals with MAGI (modified adjusted gross income) less than $150,000 are eligible for Roth contributions, with a phaseout up to $165,000. For married couples filing jointly, they must have MAGI under $236,000, with a phaseout up to $246,000.
- For traditional IRAs, the income phaseout limits are in reference to the tax deductibility of the IRA contribution. Single taxpayers making up to $79,000 in MAGI can fully deduct their traditional IRA contribution, with a phaseout up to $89,000. Couples filing jointly can fully deduct their contributions with MAGI under $126,000, with a phaseout up to $146,000.
3. Health Savings Accounts (HSAs)
HSAs are a powerful tool for those who are enrolled in high-deductible health plans (HDHPs) because they offer tax advantages for healthcare expenses. For 2025, the contribution limits have been adjusted as follows:
Self-only Coverage:
The contribution limit for individuals with self-only coverage is now $4,300, up from $4,150 in 2024.
Family Coverage:
The contribution limit for those with family coverage is now $8,550, an increase from $8,300.
Catch-up Contributions:
For those 55 and older, the catch-up contribution remains $1,000.
These higher limits allow you to save more for healthcare expenses in retirement, which is particularly valuable as healthcare costs continue to rise.
4. Simple IRA and SEP IRA Plans
Self-employed individuals and small business owners who contribute to a SIMPLE IRA (Savings Incentive Match Plan for Employees) or a SEP IRA (Simplified Employee Pension) can also benefit from increased limits:
SIMPLE IRA:
For 2025, most employees can contribute up to $16,500 (an increase from $16,000 in 2024), with a catch-up contribution of $3,500 for those 50 and older, bringing the total to $20,000. The new extended catch-up applies to SIMPLE IRAs as well, allowing individuals between 60-63 to contribute a catch-up of $5,250.
SEP IRA:
The contribution limit is 25% of an employee’s total compensation up to $70,000 in 2025 (up from $69,000 in 2024).
Why These Increases Matter
The contribution limit increases are a positive development for anyone looking to save more for their retirement or healthcare expenses. They offer an opportunity to grow your savings faster while taking advantage of tax benefits that these accounts provide. With inflation and the cost of living on the rise, being able to contribute more to your retirement accounts and HSA can provide a greater sense of security as you plan for the future.
Final Thoughts
Whether you’re contributing to a 401(k), IRA, or HSA, higher contribution limits allow you to accelerate your savings and take full advantage of the tax advantages these accounts offer. Be sure to consult with a financial planner and a tax advisor to make the most of these changes and ensure you’re on track for your retirement goals.
