The Internal Revenue Service (IRS) on Friday announced that it increased the amount that individuals can contribute to their 401(k) and other retirement plans to account for inflation.
Each year, the IRS reviews tax thresholds and limitations for various retirement accounts and considers making a cost-of-living adjustment based on the impact of inflation since the previous change occurred.
For the 2025 tax year, the IRS is increasing the annual contribution limit for 401(k) plans by $500 from the current limit of $23,000 in 2024 to $23,500 in 2024.
Those limits also apply to several other retirement plans and will undergo the same increase for the 2025 tax year, including 403(b) retirement plans, governmental 457 plans and the federal government’s Thrift Savings Plan.
The IRS also considers adjustments to the contribution limits for Individual Retirement Accounts (IRAs), including traditional and Roth IRAs. However, the IRS will hold the IRA annual contribution limits constant from 2024 to 2025 at $7,000. It’s also maintaining the IRA catch-up contribution limit for individuals aged 50 and over at $1,000 for 2025.
The catch-up contribution limit that applies to employees aged 50 and up enrolled in most 401(k), 403(b), governmental 457 plans and the Thrift