Saving in 401(k)s and IRAs is a smart way to put money aside for retirement. However, there are rules you need to know in order to take maximum advantage of these accounts.
Moreover, as with most things in the world of finances, nothing is ever truly set in stone, and adjustments to key retirement accounts provisions are common from year to year. As we approach 2025, you should be aware of three key changes that will take effect come January.
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1. 401(k) contribution and catch-up limits are increasing
A 401(k) has a pretty high contribution limit compared to other retirement accounts, which is partly why it serves as most people's main retirement account. To help participants save more for retirement (while getting a tax break), the 401(k) contribution limit typically rises with inflation, and the limit will indeed increase in 2025.
At the start of 2025, people with a 401(k) can contribute $23,500 to their account, a $500 increase from 2024's limit.
The contribution limit isn't the only thing increasing, either. The catch-up contribution -- which is intended to give older workers a boost to their retirement savings -- will also increase.
As it stands, people 50 and older can add an additional $7,500 to their 401(k) contributions, bringing the total to $31,000 for 2025. That number won't change for those between 50 and 59 years old. However, the notable change is that people aged 60 to 63 can now contribute an additional $11,250, bringing their contribution limit to $34,750.
A $3,750 increase in catch-up contributions can make a noticeable difference to someone's retirement savings. The extra amount itself may not be life-altering, but it's an extra $3,750 that now has a chance to grow and compound.
2. Traditional IRA contribution deduction eligibility is changing
Contributions to a traditional IRA aren't automatically deducted from your paycheck pre-tax like a 401(k), but you can deduct your contributions if you meet certain requirements. In 2025, the maximum amount you can contribute to an IRA (traditional and Roth) is $7,000, or $8,000 if you're 50 or older.
Whether or not your contributions are tax-deductible depends on income, filing status, and whether you or your spouse are covered by a workplace retirement (like a 401(k) or 403(b)). If either of you are covered by a workplace plan, your income limit is less generous.
Below are the phase-out ranges for 2024 and 2025:
| Filing Status | 2024 Phase-Out Range | 2025 Phase-Out Range |
|---|---|---|
| Single (covered by a workplace retirement plan) | $77,000–$87,000 | $79,000–$89,000 |
| Married filing jointly (IRA contributor covered) | $123,000–$143,000 | $126,000–$146,000 |
| Married filing jointly (IRA contributor not covered; spouse covered) | $230,000–$240,000 | $236,000–$246,000 |
| Married filing separately (covered by a workplace plan) | $0–$10,000 | $0–$10,000 |
Source: IRS.
If your income falls below the phase-out range, you can deduct all of your contributions; if it's above the phase-out range, you can't deduct any contributions; if it's in the phase-out range, you can deduct between $0 and $7,000 or $8,000.
Having the income requirements phase out is helpful for avoiding situations in which someone makes $1 above the limit and automatically becomes ineligible for the tax deduction.
3. Roth IRA income limits have increased
There are plenty of reasons to love Roth IRAs, including the tax-free withdrawals you can take in retirement. Unfortunately, the Roth IRA has one noteworthy downside: a restriction on how much you can earn and still be eligible to contribute to one.
The good news is that the income limit has been increased for 2025:
| Filing Status | 2024 Income Phase-Out Range | 2025 Income Phase-Out Range |
|---|---|---|
| Single or Head of Household | $146,000–$161,000 | $150,000–$165,000 |
| Married, filing jointly | $230,000–$240,000 | $236,000–$246,000 |
| Married, filing separately | $0–$10,000 | $0–$10,000 |
Source: IRS.
The Roth IRA phase-out range works similarly to the traditional IRA. If you earn below it, you can contribute the maximum amount; if you earn above it, you can't contribute at all; and if you're within the range, the amount you can contribute will fall between $0 and $7,000 or $8,000.
If you're eligible to contribute to a Roth IRA, you absolutely should. It's hard to overstate how beneficial having tax-free withdrawals in retirement can be.
