Trump donor Norm Champ describes how the Biden-Harris regulations have hurt Americans’ retirement funds in “The Bottom Line.”
It’s officially 2025. and it’s a good time to review your retirement plans.
The Internal Revenue Service (IRS), announced in November that it increased the amount people can contribute to their 401(k) and other retirement plans to account for inflation.
Each year, the IRS reviews the tax thresholds and limits for various retirement accounts and considers making a cost-of-living adjustment based on the impact of inflation since the previous change occurred.
For the 2025 tax year, the IRS is increasing the annual contribution limit for 401(k) plans with $500 of the current limit of $23,000 in 2024. to $23,500 in 2025
These limits also apply to several other retirement plans and will experience the same increase for the 2025 tax year, including 403(b) retirement plans, government 457 plans, and the federal government savings plan.
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The IRS has raised contribution limits and catch-up contribution thresholds for 401(k) plans and similar retirement accounts. (Reuters/Reuters Images)
The IRS is also considering adjustments to individual retirement account (IRA) contribution limits, including traditional and Roth IRAs. However, the IRS will keep annual IRA contribution limits constant from 2024 to 2025. at $7,000. It also maintains the limit on catch-up IRA contributions for people age 50 and older at $1,000 for 2025.
The catch-up contribution limit that applies to employees age 50 and older enrolled in most 401(k), 403(b), government 457 plans, and Savings Savings Plan will remain at $7,500 for 2025. Workers age 50 and older can typically contribute up to $31,000 a year into these retirement plans starting in 2025. as amended by the enactment of the SECURE 2.0 Act of 2022.
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That law also created a higher catch-up contribution limit for workers ages 60 to 63 who participate in these plans — which will increase to $11,250 instead of $7,500 in 2025.
The IRS also adjusts the thresholds below which taxpayers can contribute to a traditional IRA and receive tax deduction for their contribution.
The IRS is keeping IRA contribution limits steady, but increasing the phaseout range for traditional IRAs and the phaseout range for Roth IRAs. (J. David Ake/Getty Images/Getty Images)
For individual taxpayers who are also covered by a workplace retirement plan, the traditional scope of the phase-out of the tax deduction for IRA contributions increases to between $79,000 and $89,000 — from $77,000 to $87,000. For married couples who file joint tax returns, the phase-out range increases to between $126,000 and $146 000, which is an increase of $3,000 over last year.
The income phase-out range for taxpayers contributing to a Roth IRA increased to between $150,000 and $165,000 for individuals and heads of households, up from between $146,000 and $161,000. For married couples filing jointly, the range of the phase-out increases by $6,000 to between $236,000 and $246 000.
The IRS reviews and potentially updates the contribution and eligibility thresholds for retirement accounts such as 401(k) and IRA accounts each year to adjust for inflation. (iStock/iStock)
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The Savings loanalso known as the Retirement Savings Contribution Credit, for low- and moderate-income workers is $39,500 for individuals, $79,000 for married couples filing jointly and $59,250 for heads of household.
This article was originally published on November 1, 2024.
2025-01-01 14:00:08
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