Every year, the IRS updates the contribution limits for employer-sponsored retirement plans. For 2025, here’s what you need to know:
- Standard Contribution Limits: If you’re under age 50, you can contribute up to $23,500. If you’re over 50, you’re eligible for a catch-up contribution of $7,500.
New Rules for 2025
Enhanced Catch-Up Contribution for Ages 60-63
If you’re between the ages of 60 and 63, the catch-up contribution increases to $11,250. This change aims to give individuals nearing retirement an extra boost to their savings.
Automatic Enrollment in Employer Plans
Starting in 2025, if you change jobs, you’ll automatically be enrolled in your new employer’s plan with a 3% contribution of your income. This default is designed to help individuals avoid missed enrollment opportunities. Contributions will also automatically increase over time, but you can adjust the amount via your retirement plan platform.
Part-Time Workers’ Eligibility
Part-time employees may now qualify for employer-sponsored retirement plans. Specific rules apply, so check with your employer to determine your eligibility.
Roth Options for the Self-Employed
If you’re self-employed, more brokerage firms now offer Roth SEPs and Roth solo 401(k)s. Major providers like Schwab, Fidelity, and E*Trade support these plans, while Vanguard currently offers only SEP-IRAs and refers customers to Ascensus for other self-employed plans.
IRA Contribution Limits
For Individual Retirement Accounts (Traditional or Roth), the contribution limits remain the same as in 2024: $7,000 if you’re under 50 and $8,000 if you’re over 50. Keep in mind that only earned income qualifies for contributions (not dividends, rental income, Social Security, pensions, child/spousal support, etc.).
Roth Income Limits for 2025
Single filers: Modified Adjusted Gross Income (MAGI) must be $150,000 or less.
Married filing jointly: MAGI must be less than $236,000. MAGI is calculated as your total income minus itemized or standard deductions.
Early IRA Contributions
If you plan to contribute to an IRA, consider making your contribution in January to maximize potential tax-deferred or tax-free growth!
Here’s to making the most of the new rules and having a prosperous 2025!