**IRS Announces Increased Contribution Limits for Retirement Plans in 2025**

The Internal Revenue Service (IRS) has revealed an upcoming increase in the amount individuals can contribute to their tax-favored retirement funds. Starting in 2025, the limit for 401(k) plan contributions will rise to $23,500, up from $23,000 in 2024. These adjustments are tied to mandatory cost-of-living increases for pension plans and other retirement-related items.

Employees aged 50 and over will continue to benefit from the catch-up contribution limit of $7,500 for 2025. This means that older participants in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan can contribute up to $31,000 annually. For those aged 60 to 63, the SECURE 2.0 Act has introduced a higher catch-up contribution limit of $11,250 starting in 2025.

The limit for annual contributions to Individual Retirement Accounts (IRAs) will remain at $7,000 for 2025. Workers aged 50 and above can still add a catch-up contribution of $1,000, making their potential total $8,000. The income phase-out ranges for deductible IRA contributions will also be adjusted based on whether the contributor or their spouse is covered by a workplace retirement plan.

Roth IRAs, on the other hand, will see an increased income phase-out range. For singles and heads of household, the range will be between $150,000 and $165,000 in 2025, compared to the previous range of $146,000 to $161,000 in 2024. For married couples filing jointly, the range will be between $236,000 and $246,000, up from $230,000 to $240,000 in 2024.

For SIMPLE IRA plans, the individual contribution limit will increase to $16,500 in 2025, up from $16,000. Employees aged 50 and over can make an additional catch-up contribution of $3,500, bringing their total potential contributions to $20,000. Additionally, individuals aged 60 to 63 will benefit from a higher catch-up contribution limit of $5,250.

The Saver’s Credit, aimed at low- and moderate-income workers, will also see adjustments. The income limit for married couples filing jointly will rise to $79,000 in 2025, from $76,500 in 2024. For heads of household, the limit will increase to $59,250, up from $57,375, and for singles and married couples filing separately, it will increase to $39,500, up from $38,250.

Other adjustments include the annual benefit limit under defined benefit plans, which will increase to $280,000 in 2025 from $275,000 in 2024. The limit on premiums paid for Qualified Longevity Annuity Contracts (QLACs) will rise to $210,000 from $200,000. Additionally, the total amount of Qualifying Charitable Distributions (QCDs) that can be excluded from gross income will increase to $108,000 from $105,000.

New provisions under the SECURE 2.0 Act now allow victims of domestic abuse to withdraw up to $10,300 from their retirement plans without incurring additional taxes, an increase from the current limit of $10,000.

For more detailed information about these adjustments, refer to the IRS’s official guidance, Notice 2024-80.