The Internal Revenue Service (IRS) released new limits for retirement accounts in 2025.
Understanding these changes can help you make the most of your retirement strategy and avoid potential tax penalties. Here’s what you need to know.
Individual Retirement Accounts (IRAs)
Traditional IRA contribution limits will remain at $7,000 for 2025. Catch-up contributions for those over age 50 also remain at $1,000, bringing the total limit to $8,000.
Remember, once you reach age 73, you must begin taking required minimum distributions from a Traditional IRA in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
Roth IRAs
The income limits for Roth IRA contributions are increasing. Single filers can contribute if their income is between $150,000 and $165,000, up by $4,000. For married couples filing jointly, the range is $236,000 to $246,000, a $6,000 increase. Married individuals filing separately still have a phase-out range of $0 to $10,000.
To withdraw Roth 401(k) earnings tax- and penalty-free, the account must be at least five years old, and withdrawals must happen after age 59½. Exceptions include certain situations like the account owner’s death.
Workplace Retirement Accounts
For 2025, the contribution limit for 401(k), 403(b), and 457 plans will increase by $500 to $23,500. Those aged 50 and older can still contribute an extra $7,500, for a total limit of $31,000. Individuals aged 60 to 63 can make additional catch-up contributions of up to $11,250, raising their total limit to $34,750.
At age 73, required minimum distributions (RMDs) must begin for most 401(k) and other defined-contribution plans. Withdrawals are taxed as ordinary income, and withdrawals before age 59½ may incur a 10% federal tax penalty.
SIMPLE Accounts
Contribution limits for SIMPLE IRA plans will increase by $500, bringing the new limit to $16,500.
Much like a traditional IRA, once you reach age 73, you must begin taking required minimum distributions (RMDs) from a SIMPLE account in most circumstances. Withdrawals are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
Keep in mind that this update is for informational purposes only, so please consult with an accounting or tax professional before making any changes to your 2025 tax strategy.
Please contact us if there are any questions we can help answer or if you’re interested in a review of your retirement accounts.