The 2025 contribution limits for 401(k) and IRA: A guide to saving more.

The IRS has announced the 2025 contribution limits for 401(k)s and IRAs, with a moderate increase from $23,000 in 2024 to $23,500. This change applies to 401(k)s, 403(b)s, and most 457 plans, as well as the federal Thrift Savings Plan.

The annual contribution limit to an IRA remains at $7,000 in 2024.

The annual caps on contributions to both workplace and individual retirement plans are adjusted by the IRS to account for inflation.

401(k) contribution limits for 2025

In 2025, workers who contribute to certain retirement plans, including the federal government's Thrift Savings Plan, can contribute up to $23,500, a $500 increase from the $23,000 cap in 2024. This equates to a monthly cap of approximately $1,958 or $980 per twice-monthly paycheck when spread evenly throughout the year.

The total 401(k) contribution cap for employees 50 or older in 2023 and 2024 is $31,000, with a limit on additional catch-up contributions of $7,500.

The maximum contribution set by the IRS does not include the matching funds that your employer can contribute. The combined contribution limit for employees and employers is $70,000 in 2024, up from $69,000 in 2023.

The contribution limit for employees aged 50 and above contributing to a SIMPLE IRA is $3,500.

Some 401(k) plans enable employees to make after-tax contributions to exceed the combined employee and employer contribution limit.

If you want to reach the combined employee/employer limit of $70,000 for the year, you can make additional after-tax contributions of up to $23,000. However, if you do this, the earnings on these contributions will be tax-deferred, meaning you'll owe taxes when you withdraw them.

IRA contribution limits for 2025

The total limit for traditional and Roth IRAs in 2024 is $7,000, which amounts to approximately $583 per month or $292 per pay period.

Those aged 50 or above can contribute an extra $1,000 to their IRA, increasing their total limit to $8,000.

In 2025, the income thresholds for single and head-of-household taxpayers to be eligible for a Roth IRA will be between $150,000 and $165,000, an increase from $146,000 to $161,000 in 2024.

The income phase-out range for married couples filing jointly has been increased from between $230,000 and $240,000 to between $236,000 and $246,000.

The income phase-out range for married couples filing separately is between $0 and $10,000.

Which retirement account should you contribute to?

Enrolling in a 401(k) is usually advisable because of its higher limits compared to IRAs, especially if your employer matches contributions.

By deferring taxes through a 401(k), your money can grow tax-free until you withdraw it in retirement.

A Roth IRA offers tax-free withdrawals in retirement, making it a valuable addition to a diversified retirement portfolio.

If you don't have access to a 401(k), a Roth IRA is still a wise option, especially if you anticipate being in a higher tax bracket when you retire. Fidelity offers Roth IRA options that allow savers to choose between having the brokerage manage their investments or doing it themselves.

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