The end of the year is a new occasion to boost your retirement savings. As part of your year-end planning for 2024, it’s important to look ahead to the new 2025 IRA contribution rules from the IRS.
Each year, the IRS sets new limits on how much you can contribute to traditional IRAs and Roth IRAs. This contribution limit goes up each year based on inflation (what the IRS calls cost-of-living adjustments, or COLA).
As of this writing, the IRS has not yet announced the new IRA contribution limits for 2025. But no matter what the new IRA limits are for 2025, here are a few key strategies that everyone should consider as you get ready to save and invest for retirement in 2025 and beyond.
Use a Roth IRA if you qualify
Using a Roth IRA is one of the best ways to save for retirement, because it lets your money grow tax free, and gives you tax-free distributions in retirement. Unlike a traditional IRA or 401(k), the money you put into a Roth IRA does not give you a tax deduction. But instead, that money grows tax free and can provide you with tax-free income in retirement.
For 2024, people who qualify for a Roth IRA can put up to $7,000 into this special retirement account. And people aged 50 and over can put in an extra $1,000 as a catch-up contribution.
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But not everyone qualifies for a Roth IRA. There are some restrictions based on your income and tax-filing status. For example, for 2024, these people can make a full contribution to a Roth IRA:
- Single filers with modified adjusted gross income of less than $146,000
- Married filing jointly with modified adjusted gross income of less than $230,000
Other people with higher incomes or different filing statuses might be able to make a partial contribution, or no contribution, to a Roth IRA. These limits are likely to be slightly higher for 2025, but we won’t know until the IRS makes its announcement of new IRA contribution rules for 2025.
Maximize your combined IRA contribution limit
If you would rather get an upfront tax break on your IRA contributions, you don’t have to use a Roth IRA. You can choose a traditional IRA and get a tax deduction (for 2024) of up to $7,000 if you qualify — or up to $8,000 with a catch-up contribution for people age 50 and up.
There are a few restrictions, based on income and tax-filing status, for who can get a tax deduction from a traditional IRA. As of 2024, these people can deduct the full amount of traditional IRA contributions:
- Single filers
- Married filing jointly with a spouse who is not covered by a workplace retirement plan
- Married filing jointly with a spouse who is covered by a workplace retirement plan, with modified adjusted gross income of less than $230,000
Other people with different filing statuses or higher incomes might only be allowed to deduct part of the money they put into a traditional IRA — or not get a deduction at all. This makes it important to be strategic about your IRA contributions.
Keep in mind: If you qualify for both types of IRA accounts, you can put a total of up to $7,000 for 2024 into traditional IRA and Roth IRA accounts combined (or $8,000 if you’re age 50 and over). Based on your income and tax goals, you might want to split up that money — put half into a tax-deductible traditional IRA, and put half into a Roth IRA for tax-free income in retirement.
Age 50 and over? Make IRA catch-up contributions
If you’re 50 years old or over, your retirement age is getting closer — and that makes it even more important to boost your retirement savings. The IRS gives the 50-plus cohort an added bonus by letting you make an extra $1,000 (for 2024) of catch-up contributions to your IRAs — traditional, Roth, or both combined.
We don’t know yet what the 2025 IRA catch-up contribution limit will be. But this limit will now be indexed to inflation. And based on recent high inflation, it’s possible that the 2025 IRA catch-up limit could be slightly higher than the usual $1,000.
Every extra dollar of retirement investments counts. If the IRS gives you permission to save an extra $1,000 (or more) in tax-advantaged retirement accounts, you should take that deal.
Bottom line
The new IRS rules for 2025 IRA contribution limits could be announced any day. Based on 2024 rules, it’s possible that many retirement savers could be allowed to put up to $7,000 (or more) into traditional IRAs, Roth IRAs, or both. People aged 50 and over should maximize their catch-up contributions in 2025, which might be higher than previous years.
