As we step into 2025, it's essential to stay updated on the latest changes in retirement plan and IRA contribution limits. Making increases and adjustments annually can significantly enhance your retirement savings strategy. Here are the key updates between 2025 and 2024, along with some financial moves to make 2025 a great year for financial progress.
Retirement Plan Contribution Limits
For 2025, the IRS has announced an increase in the annual contribution limit for 401(k), 403(b), and governmental 457 plans. The limit has been raised to $23,500, up from $23,000 in 2024 limit.
Additionally, the catch-up contribution limit for employees aged 50 and over remains at $7,500 for 2025. However, there's a notable change for employees aged 60 to 63, who can now contribute an additional $11,250 as part of the SECURE 2.0 Act's higher catch-up contribution limit.
IRA Contribution Limits
The contribution limits for Individual Retirement Accounts (IRAs) remain unchanged for 2025. The annual limit for both traditional and Roth IRAs is $7,000. The catch-up contribution limit for individuals aged 50 and over also remains at $1,000.
However, the income ranges for determining eligibility to make deductible contributions to traditional IRAs and to contribute to Roth IRAs have increased. For single taxpayers covered by a workplace retirement plan, the phase-out range is now between $79,000 and $89,000, up from $77,000 to $87,000 in 2024. For married couples filing jointly, the phase-out range is between $126,000 and $146,000, up from $123,000 to $143,000.
The income limits for Roth IRA contributions have also been updated. For Single filers, full contributions can be made if your income is under $150,000. Limits are reduced for income between $150,000 and $165,000 and phased out for income above $165,000. For Married filing jointly, contributions are reduced at $236,000 and completely phased out at $246,000.
HSA Contribution Limits
Health Savings Accounts (HSAs) are another crucial component of a comprehensive financial plan. For 2025, the IRS has increased the HSA contribution limits. Individuals can now contribute up to $4,300, up from $4,150 in 2024. For family coverage, the limit has been raised to $8,550, up from $8,300. The catch-up contribution for those aged 55 and older remains at $1,000.
3 Financial Updates to Make at the Start of the Year
1. Review and Adjust Your Budget: The beginning of the year is an excellent time to review your budget. Take a quick look at how much you made in 2024 vs. how much you spent and how much you put in savings. Take note of your wins! Even small wins are progress. Make adjustments to ensure you're on track to meet your financial objectives for 2025. Click here for free access to our Balanced Money Toolkit.
2. Update Retirement Contributions: With the new contribution limits, consider increasing your retirement plan contributions. Even small increases to your 401(k) or IRA contributions will make a difference and help you take full advantage of tax benefits and compounding growth.
3. Set Up Automatic Transfers: Automate your savings by setting up automatic transfers to your retirement accounts and emergency fund. This ensures consistent contributions and helps you stay disciplined. If you already have monthly automated transfers, consider increasing these where you can. With our essential portfolios you can set up general investment accounts for specific goals as well as cash reserve accounts. Let us know if you need help! Click here to set up an account with Betterment.
By staying informed about the latest contribution limits and making strategic financial updates, you can set yourself up for a successful and financially secure year. Happy planning!
Centered Financial, LLC is a registered investment adviser offering advisory services in the State of California, Utah, Texas and in other jurisdictions where exempted. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques, strategies, or investments discussed are suitable for all investors or will yield positive outcomes. To determine which strategies or investment(s) may be appropriate for you, consult your financial adviser prior to investing. Any discussion of strategies related to tax or legal planning is general and is not intended as tax or legal advice. Please consult appropriate tax and legal professionals for recommendations pertaining to your specific situation.
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