Attention all savers and future retirees! The Internal Revenue Service (IRS) has just delivered an early holiday gift by announcing an increase in the amount you can stash away in your 401(k) plans for 2025. At Leading Retirement Solutions we are here to assist you in making the most of this opportunity.
Retirement Plan Maximum Contributions:
401(k) contributions are one of the easiest and most cost-effective ways for employees to save for retirement. Each year, the IRS reviews and adjusts the maximum contributions that can be made to 401(k), 403(b), Cash Balance, and other types of retirement plans, more often increasing what owners and employees can contribute to a plan for retirement savings and tax deductions.
Contribution Highlights for 2025:
- $23,500 – The contribution maximum for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.
- $7,000 – The contribution maximum for employees who participate in IRAs. The IRA catch?up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost?of?living adjustment but remains $1,000 for 2025.
- Employees aged 50+ can contribute up to $31,000 to most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan, with a $7,500 catch-up limit. Those aged 60-63 have a higher catch-up limit of $11,250.
| 2025 | 2024 | 2023 | |||
| 401(k), 403(b), Profit-Sharing Plans, 457 etc. | |||||
| Annual Compensation for Contributions | 350,000 | 345,000 | 330,000 | ||
| Elective Deferrals | 23,500 | 23,000 | 22,500 | ||
| Catch-up Contributions | 7,500 | 7,500 | 7,500 | ||
| Defined Contribution Maximum | 70,000 | 69,000 | 66,000 | ||
| ESOP Contribution Maximum (Account balance/Lengthening determination) | 1,415,000 /280,000 | 1,380,000 /275,000 | 1,330,000 /265,000 | ||
| Other | |||||
| HCE Threshold (Highly Compensated Employee) | 160,000 | 155,000 | 150,000 | ||
| Defined Benefit Maximum | 280,000 | 275,000 | 265,000 | ||
| Key Employee | 230,000 | 220,000 | 215,000 | ||
| Control Employee (board member or officer) | 140,000 | 135,000 | 130,000 | ||
| Control Employee (compensation-based) | 285,000 | 275,000 | 265,000 | ||
| Taxable Wage Base | 176,100 | 168,600 | 160,200 | ||
| IRAs | |||||
| IRA Contribution Maximum | 7,000 | 7,000 | 6,500 | ||
| IRA Catch-Up Contributions | 1,000 | 1,000 | 1,000 | ||
| Traditional IRA AGI Deduction Phase-out Starting at | |||||
| Joint Return | 126,000 | 123,000 | 116,000 | ||
| Single or Head of Household | 79,000 | 77,000 | 73,000 | ||
| SEP IRA | |||||
| SEP Minimum Compensation | 750 | 750 | 750 | ||
| SEP Maximum Contribution | 70,000 | 69,000 | 66,000 | ||
| SEP Maximum Compensation | 350,000 | 345,000 | 330,000 | ||
| SIMPLE IRA | |||||
| SIMPLE Maximum Contributions | 16,500 | 16,000 | 15,500 | ||
| SIMPLE Catch-up Contributions | 3,500 | 3,500 | 3,500 | ||
Additional information can be found on the here.
2025 Social Security Cost of Living Adjustment (COLA) Rates
SSA announced an increase of 2.5 percent for Social Security payouts. The cost-of-living adjustment (COLA) will begin with benefits payable to nearly 68 million Social Security beneficiaries in January 2025. Increased payments to nearly 7.5 million SSI recipients will begin on December 31, 2024. (Note: some people receive both Social Security and SSI benefits)
These updates underscore the importance of planning for retirement and maximizing your contributions while you can. As we approach 2025, it’s a perfect time to review your retirement strategy and make sure you’re taking full advantage of these increased limits. Remember, every dollar you save today is a step toward a secure and comfortable retirement tomorrow. Schedule a personalized consultation with us or reach out directly at 206-430-5084 to start the conversation today.
For tips and information regarding retirement plans, contact us.
