2025 401(k) and IRA contribution limits: What you need to know
Investors are preparing for a potentially volatile week. Notably, key events include a presidential election, a Federal Reserve meeting, economic reports, and the continuation of earnings season. Marriott kicked off the week with disappointing results. Specifically, the company missed sales and profit forecasts and lowered its full-year estimates.
Meanwhile, the IRS has announced higher contribution limits for 401(k) plans starting in 2025. The maximum tax-free contribution will rise from $23,000 to $23,500. In addition, the same change applies to 403(b) and other employee-sponsored retirement accounts.
Americans nearing retirement will benefit from a larger tax incentive. For the first time, the “catch-up” contribution limit for those aged 60 to 63 will increase. It will rise from $7,500 to $11,250.
Moreover, more lower- and moderate-income workers may qualify for the Retirement Saver’s Credit. This credit provides a dollar-for-dollar reduction in tax bills based on retirement savings. For example, single filers with incomes up to $39,500 will qualify, up from $38,350 in 2024. Likewise, for heads of household, the threshold increases to $59,250, up from $57,375. Married couples filing jointly can earn up to $79,000, an increase from $76,500.
However, for those contributing to IRAs or Roth IRAs, the annual contribution limit remains at $7,000.
These changes are part of a 2025 cost-of-living adjustment, according to the IRS.
This blog post has been sourced from TheStreet
