2025 Maximum Contributions to Roth IRA and 401(k): What You Need to Know
The new year is here, and it's the perfect time to check your retirement contributions. The IRS has announced the 2025 maximum contributions for retirement accounts, and there are some changes you’ll want to be aware of. Here's a breakdown of the limits for 2025, how they compare to 2024, and why you should take action to update your contributions today.
2025 Maximum Contribution Limits
Roth IRA
The maximum contribution limit for Roth IRAs in 2025 is $7,000, which is unchanged from 2024.
If you’re age 50 or older, you can add an extra $1,000 as a "catch-up contribution." This remains the same as last year, bringing your total to $8,000 if you're eligible.
Income Limits for Roth IRA Contributions
For 2025, the ability to contribute to a Roth IRA begins to phase out at an income of $146,000 for single filers and $214,000 for married couples filing jointly.
If your income exceeds these limits, you won’t be able to contribute directly to a Roth IRA. However, a "backdoor Roth IRA" may be an option to consider if you make too much.
401(k)
The maximum contribution limit for 401(k) accounts in 2025 is $23,000, up from $22,500 in 2024.
If you’re 50 or older, the catch-up contribution is $7,500, making the total possible contribution $30,500 (up from $30,000 in 2024).
What This Means for You
If you’re contributing to a Roth IRA or a 401(k), these limits are the maximum amount you’re allowed to save in these accounts each year. Reaching these limits can help you take full advantage of the tax benefits these accounts provide.
Roth IRA: Contributions are made with money you’ve already paid taxes on. Your money grows tax-free, and withdrawals in retirement are also tax-free.
401(k): Contributions are often pre-tax (taken out of your paycheck before taxes), reducing your taxable income now, with taxes paid on withdrawals in retirement.
Why You Should Max Out Contributions If You Can
Maxing out your contributions is one of the easiest ways to build long-term wealth. By contributing more, you’re allowing your money to grow and compound (earn interest on interest) over time. Even small increases can have a big impact when you retire.
Don’t Leave Free Money on the Table
If your employer offers a 401(k) match, make sure you’re contributing enough to get the full match. This is essentially free money and can make a big difference in your account balance over time.
Take Action Today
Review Your Budget: See if you can increase your contributions to hit the new limits.
Log in to Your Accounts: Update your contribution percentage through your employer’s benefits portal for your 401(k) or through your brokerage for your Roth IRA.
Set It and Forget It: Automate your contributions to make saving effortless.
By updating your contributions now, you’ll be able to take full advantage of the 2025 limits. If maxing out isn’t possible, aim to increase your contributions by even a small amount. Every dollar counts when you’re building your future.
