2025 Retirement Contribution Limits: How to Boost Your Savings This Year

With new cost-of-living adjustments from the IRS, 2025 brings slight increases to retirement contribution limits, allowing you and your employees to save even more. These updates, detailed in IRS Notice 2024-80, apply to 401(k) plans, IRAs, SIMPLE plans, and more, though the adjustments are more modest than in recent years due to easing inflation.

401(k) Contribution Limits for 2025

Starting in 2025, employees contributing to a 401(k) plan can save up to $23,500—an increase from $23,000 in 2024. This limit also applies to 403(b) plans, most 457 plans, and the federal Thrift Savings Plan. For employees aged 50 and over, the catch-up contribution remains at $7,500. However, under the SECURE 2.0 Act, those aged 60 to 63 can take advantage of a higher catch-up amount of $11,250, boosting their total potential contribution to $34,750 in 2025.

SEP and Defined Contribution Plan Limits

Defined contribution plans, including SEP plans, will see an increase in contribution limits from $69,000 to $70,000 in 2025. To be eligible for a SEP plan, employees must earn a minimum of $750 annually—a threshold that remains unchanged from 2024.

SIMPLE Plan Contribution Limits

For 2025, the deferral limit for SIMPLE plans rises to $16,500 (up from $16,000). For employees 50 and over, the catch-up contribution stays at $3,500, but those between 60 and 63 can now contribute an additional $5,250, potentially saving up to $21,750.

Additional Retirement Plan Limits

In 2025, other plan limits also increase, allowing more flexibility for certain high-earning employees and plan participants:

• Defined Benefit Plans: The annual benefit cap rises from $275,000 to $280,000.
• Top-Heavy Plan Key Employee Limit: Increases from $220,000 to $230,000.
• Highly Compensated Employee Threshold: Increases from $155,000 to $160,000.

IRA Contributions Remain Unchanged

The annual contribution limit for IRAs will remain at $7,000, with a fixed catch-up contribution of $1,000 for individuals 50 and older.

Plan for a More Secure Future

The increased contribution limits for 2025 can help you and your employees build a more robust retirement fund. If you have questions about these updates or want to explore other tax-advantaged retirement options, contact us today. We’re here to help you make the most of your retirement savings strategy.

Ken Botwinick, CPA Partner, CPA

Ken Botwinick, CPA is a Partner with Botwinick & Company, LLC and has been with the firm for more than 25 years. Ken specializes in providing accounting, tax, and business consulting services to dental and medical practices. He established the firm’s dental practice and is a sought-after lecturer at dental continuing education programs. Ken has his “finger on the pulse of the dental industry,” and with comprehensive experience in ownership transitions, he assists clients in the healthcare industry to reach their professional and financial aspirations and goals. In addition to accounting, tax, and consulting engagements with dental and healthcare practices, Ken provides a wide range of services to medium-sized and closely held businesses. Over the past decade, Ken has also played an integral role in the success of numerous technology start-up clients in Europe and Israel. By providing specialized tax guidance and back-office support, Ken has supported many entities as they transitioned from one-person organizations to 100-person venture-capital-backed enterprises. Ken’s client service philosophy is to take a “team approach” to engagements and provides clients with highly effective strategies and solutions. The result is low employee turnover and quality client service at the highest level. The firm’s staff and management collaborate and work closely together, and the clients reap the benefits. Ken also fosters continuing education at the firm to keep the partners and the staff up to date on new legislative changes, including emerging economic stimulus tax credits.

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