Some Retirement Plan Benefits Will Increase for 2025
With the 2025 tax year almost here, there's news from the IRS about retirement savings. According to a recent announcement from the tax agency (Notice 2024-80), there will be increases to some retirement plan contributions next year due to inflation adjustments. However, with inflation coming down, not all types of retirement plans will see increases, and the amounts for other plans aren't as high as they've been in recent years.
The Social Security "Earnings Test" Will Increase in 2025 Many retirees collecting Social Security benefits go back to work part time. If they haven't reached full retirement age and they earn over a certain amount, they'll have a portion of their monthly benefits withheld. This is called the Social Security earnings test. The earnings limit for workers who are younger than full retirement age will increase to $23,400 in 2025. Social Security will deduct $1 from benefits for each $2 earned over $23,400. (In 2024, the amount these recipients can earn is $22,320.) The earnings limit for people reaching their full retirement age in 2025 will increase to $62,160. Social Security will deduct $1 from benefits for each $3 earned over $62,160 until the month the worker turns full retirement age. (In 2024, the limit for these workers is $59,520.) There's no limit on earnings for workers who are full retirement age or older for the entire year. Your full retirement age depends on when you were born. For example, for those born in 1960 and later, it's 67. |
Here's a rundown of some of the changes:
401(k) and 403(b) Plans
Taxpayers will be able to contribute up to $23,500 in 2025 (up from $23,000 in 2024) to 401(k) and 403(b) plans. The catch-up contribution amount for those age 50 and older will remain $7,500. However, there will be a new catch-up contribution amount for taxpayers ages 60, 61, 62 and 63. For them, the 2025 catch-up amount will be $11,250. This is a change that takes effect next year under the SECURE 2.0 Act.
IRAs
The limit on annual contributions to traditional and Roth IRAs will remain $7,000 for 2025, the same as it is for 2024. The extra catch-up contribution for those age 50 and older will remain $1,000.
Phase-Out Amounts for Traditional IRAs
The deduction for taxpayers making contributions to a traditional IRA will phase out in 2025 for singles who are covered by a workplace retirement plan and have modified adjusted gross incomes (MAGIs) between $79,000 and $89,000, up from $77,000 and $87,000 in 2024.
For married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the 2025 income phase-out range will be $126,000 to $146,000, up from $123,000 to $143,000 in 2024.
For an IRA contributor who isn't covered by a workplace retirement plan and is married to someone who's covered, the deduction will phase out in 2025 if the couple's income is between $236,000 and $246,000, up from $230,000 and $240,000 in 2024. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range isn't subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Phase-Out Amounts for Roth IRAs
The 2025 AGI phase-out range for married couples filing jointly and making contributions to a Roth IRA will be $236,000 to $246,000, up from $230,000 to $240,000 for 2024.
For single and head-of-household taxpayers, the 2025 income phase-out range will be $150,000 to $165,000, up from $146,000 to $161,000 for 2024. For a married individual filing a separate return, the phase-out range isn't subject to an annual cost-of-living adjustment and will remain $0 to $10,000.
The 2025 AGI limit for the saver's credit (also known as the retirement savings contribution credit) for low and moderate-income workers will be $79,000 for married couples filing jointly, up from $76,500 in 2024. For heads of household, it will be $59,250, up from $57,375; and for singles and married individuals filing separately, it will be $39,500, up from $38,250.
Here are some other 2025 retirement plan amounts, as compared with 2024:
| Qualified Plan Limits | 2025 | 2024 |
| Defined Contribution Plan Dollar limit on additions on Sec. 415(c)(1)(A) | $70,000 | $69,000 |
| The limitation on the annual benefit under a defined benefit plan under Sec. 415(b)(1)(A) | $280,000 | $275,000 |
| Annual compensation limit under Sec. 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) | $350,000 | $345,000 |
| SIMPLE deferrals under Sec. 408(p)(2)(E) | $16,500 | $16,000 |
| SIMPLE catch-up contributions for those age 50 and older | $3,500 | $3,500 |
| SIMPLE catch-up contributions for those age 60, 61, 62 and 63* | $5,250 | N/A |
| Compensation defining highly compensated employee | $160,000 | $155,000 |
| Compensation defining key employee in a top-heavy plan under Sec. 416(i)(1)(A)(i) | $230,000 | $220,000 |
| Compensation triggering SEP contribution requirement under Sec. 408(k)(2)(C) | $750 | $750 |
* A change that takes effect in 2025 under SECURE 2.0
Contact your tax advisor if you have questions about retirement plan contributions or other tax issues.