The IRS has announced new 401(k) contribution limits for 2025.
In its release Friday, the agency increased the employee deferral limit to $23,500, up from $23,000 in 2024. The change applies to workplace plans, including 401(k)s, 403(b)s and most 457 plans, along with the federal Thrift Savings Plan.
The IRS also unveiled 2025 catch-up contribution limits for savers age 50 and older, individual retirement account savings limits and higher income thresholds for Roth IRA contributions.
Starting in 2025, the 401(k) catch-up contribution limit will remain at $7,500 for savers 50 and older. But investors aged 60 to 63 can instead save an extra $11,250, based on changes enacted via Secure 2.0. Both amounts are above the $23,500 deferral limit for 2025.
In 2023, only 14% of employees deferred the maximum amount into 401(k) plans, according to Vanguard’s 2024 How America Saves report, which included data from 1,500 qualified plans and nearly 5 million participants.
Across plans, the average 401(k) deferral rate was an estimated 7.4% in 2023, according to the same report. The combined savings rate, including employer contributions, was 11.7%, Vanguard found.
The IRS announcement comes roughly one week after the agency unveiled dozens of inflation adjustments for 2025, including federal income tax brackets, higher capital gains brackets, a bigger estate and gift tax exemption, changes to eligibility for the earned income tax credit, among others.
