Highlights of Changes to Retirement Plans in 2025

Regularly reviewing updates to Individual Retirement Accounts (IRAs) and 401(k) plans is crucial. This includes keeping an eye on changes to existing regulations, such as increased contribution limits or revised withdrawal requirements.

As we look forward, the SECURE 2.0 Act introduces significant changes, to be implemented over several years, that will impact traditional IRAs, Roth IRAs, and 401(k) plans alike. Familiarizing yourself with these changes can help enhance your retirement savings and avoid penalties.

Here are some changes coming to retirement accounts:

Annual Contribution Limits

Starting in 2025, the maximum annual contribution limit for employees participating in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan will increase to $23,500, up from $23,000. However, the annual contribution limit for IRAs remains unchanged at $7,000. The IRA catch-up contribution limit for individuals aged 50 and over has been amended under the SECURE 2.0 Act of 2022 to include an annual cost-of-living adjustment, but for 2025, it remains at $1,000.

For employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan, the catch-up contribution limit remains $7,500 for 2025. This means that participants aged 50 and older can contribute up to $31,000 each year, beginning in 2025. Under SECURE 2.0, a higher catch-up contribution limit applies to employees aged 60, 61, 62, and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250, up from $7,500.

Eligibility and Phase-Out Ranges

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver’s Credit have all increased for 2025. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If either the taxpayer or their spouse was covered by a retirement plan at work during the year, the deduction may be reduced or phased out based on filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan, the phase-out ranges do not apply.

For single taxpayers covered by a workplace retirement plan, the phase-out range has increased to between $79,000 and $89,000, up from $77,000 to $87,000. For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range has increased to between $126,000 and $146,000, up from $123,000 to $143,000. For an IRA contributor not covered by a workplace retirement plan but married to someone who is, the phase-out range has increased to between $236,000 and $246,000, up from $230,000 to $240,000. For married individuals filing separately who are covered by a workplace retirement plan, the phase-out range remains between $0 and $10,000, with no annual cost-of-living adjustment.

Roth IRA Contributions

The income phase-out range for taxpayers making contributions to a Roth IRA has increased to between $150,000 and $165,000 for singles and heads of household, up from $146,000 to $161,000. For married couples filing jointly, the phase-out range has increased to between $236,000 and $246,000, up from $230,000 to $240,000. The phase-out range for married individuals filing separately who make contributions to a Roth IRA remains between $0 and $10,000, with no annual cost-of-living adjustment.

Saver’s Credit

The income limit for the Saver’s Credit (Retirement Savings Contributions Credit) for low- and moderate-income workers has increased to $79,000 for married couples filing jointly, up from $76,500. For heads of household, it has increased to $59,250, up from $57,375, and for singles and married individuals filing separately, it has increased to $39,500, up from $38,250.

SIMPLE Retirement Accounts

The amount individuals can generally contribute to their SIMPLE retirement accounts has increased to $16,500, up from $16,000. For certain applicable SIMPLE retirement accounts, individuals can contribute a higher amount, which remains at $17,600 for 2025. The catch-up contribution limit for employees aged 50 and over who participate in most SIMPLE plans remains at $3,500. However, for certain applicable SIMPLE plans, the catch-up limit is $3,850 for 2025. Under SECURE 2.0, a higher catch-up contribution limit applies to employees aged 60, 61, 62, and 63 who participate in SIMPLE plans. For 2025, this higher catch-up contribution limit is $5,250.

By staying informed about the latest updates, such as the changes introduced by the SECURE 2.0 Act, individuals can make more strategic decisions regarding their retirement plans. Proactively managing your IRAs and 401(k) accounts not only helps ensure compliance with new regulations but also maximizes your savings potential. Moving forward in 2025, keeping up with these changes will help pave the way for a more confident and prosperous retirement. Here’s to a great year ahead, filled with smart financial decisions and growth!

Sources: IRS

Any opinions are those of Lorayne Fiorillo and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Past performance is not indicative of future results.

Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.