Savings Contribution Limits: A Look at Key 2025 Account Levels

by Jesse Fulton - Monday, 11 November, 2024

Before a new year begins, it's probably going to be a good idea to consider any new contribution limits set by the government for various savings vehicles. Reviewing what's allowed in terms of building a nest egg can give you a leg up in planning how best to maximize your savings in a tax-efficient manner and avoiding costly penalties.

Along these lines, government authorities have proactively set key contribution limits for the new calendar year. The specifics of such adjustments in 2025 are summarized below. (Details on HSA account changes were released separately by the IRS.)

*The catch-up contribution limit that generally applies 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 remains $7,500 for 2025. Therefore, participants in most 401(k), 403(b), governmental 457 plans and the federal government's Thrift Savings Plan who are 50 and older generally can contribute up to $31,000 each year, starting in 2025. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500.

Please note: Catch-up contributions typically only apply to individuals who are age 50 or older for IRAs, Roth IRAs, 401(k), 403(b), 457 plans, SARSEPs, and SIMPLE Plans and age 55 or older for HSA accounts.

Also note there is an IRA deduction phase-out for those who are active participants in an employer-sponsored retirement plan. These are based on a taxpayer's Modified Adjusted Gross Income (MAGI), which refers to a person's adjusted gross income after taking into account certain allowable deductions and tax penalties.

The phase-out ranges for traditional IRAs in 2025 include the following:

• If you are Single or Head of Household (and you did not live with your spouse at any time during the year) covered by a workplace retirement plan:
  • If MAGI is <$79,000, you can have a full deduction up to the amount of your contribution limit.
  • If MAGI is > $79,000 but < $89,000, your deduction is reduced. See IRS Publication 590-A to calculate your reduced amount.
  • If MAGI is > $89,000, no deduction is allowed.
• If you are Married Filing Jointly or Qualifying Widow(er) and the spouse making the IRA contribution is covered by a workplace retirement plan: 
  • If MAGI is <$126,000, you can have a full deduction up to contribution limit.
  • If MAGI is > $126,000 but < $146,000, your deduction is reduced. See Publication 590-A to calculate your reduced amount.
  • If MAGI is > $146,000, no deduction is allowed
• If you are Married Filing Separately covered by a workplace retirement plan (and you lived with your spouse):
  • If MAGI is < $10,000, your deduction is reduced. See Publication 590-A to calculate your reduced amount.
  • If MAGI is > $10,000, no deduction is allowed

Also, note that there is a Roth IRA phase-out depending on your Modified Adjusted Gross Income (MAGI). Again, MAGI relates to person's adjusted gross income after taking into account certain allowable deductions and tax penalties. 

The phase-out ranges for Roth IRAs in 2025 include the following:

• If you are single, head of household or married filing separately (and do not live with a spouse):
  • If MAGI is <$150,000, you can contribute up to the limit.
  • If MAGI is > (or =) $150,000 but < $165,000, your contribution limit is reduced. See Publication 590-A to calculate your reduced amount.
  • If MAGI is > (or =) $165,000, you can't make a contribution to a Roth IRA.
• If you are married filing jointly or qualifying widow(er): 
  • If MAGI is <$230,000, you can contribute up to the limit.
  • If MAGI is > (or =) $236,000 but < $246,000, your contribution limit is reduced. See Publication 590-A to calculate your reduced amount.
  • If MAGI is > (or =) $246,000, you cannot make a contribution to a Roth IRA.
• If you are married filing separately and you live with your spouse:
  • If MAGI is > $0 but < $10,000, your contribution limit is reduced. See Publication 590-A to calculate your reduced amount.
  • If MAGI is > (or =) $10,000, you cannot make a contribution to a Roth IRA.

The above information is intended as a broad guide to 2025 contribution limits for retirement savers. For more detailed questions, however, IFA recommends you consult with a tax professional.

Along those lines, Lisa Rimke — who serves as head of IFA's tax planning division — stands ready to help. As an experienced certified public accountant (CPA), she and her colleagues at IFA Taxes work with individuals and business owners on a range of different accounting and tax filing issues. 

To get ahold of Lisa, you can contact her directly at: lisarimke@ifa.com or call us at: (888) 302-0765. An initial consultation can be made on a complimentary basis through Lisa or your IFA wealth advisor. 

This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, service, or considered to be tax advice. There are no guarantees investment strategies will be successful. Investing involves risks, including possible loss of principal.

This is intended to be informational in nature and should not be construed as tax advice. IFA Taxes is a division of Index Fund Advisors, Inc.