Whether you’ve offered a retirement plan for years, just started one, or are contemplating adding it to your benefits package, keeping up with retirement contribution limits is essential.
Benefit plan limits are adjusted annually for cost-of-living changes. The IRS defines how much employees can contribute to their retirement plans, the tax benefits they can receive, and how much employers can contribute per employee. These limits are based on factors such as age, income, filing status, and account type.
Read up on the 2025 retirement contribution limits to prepare your business and your employees.
401(k) Contribution Limits
The 2025 individual retirement contribution limit increased from $23,000 in 2024 to $23,500, allowing employees to contribute an additional $500 more to their 401(k) plans.
Do you offer an employer-matching contribution? Note that the overall limit, including both employee and employer contributions, is now $70,000.
Employees aged 50 and over can also make catch-up contributions, which remain at $7,500 from 2024. However, as of 2025, those aged 60 to 63 can make a higher catch-up contribution of up to $11,250, thanks to the SECURE 2.0 Act. This means that if the retirement plan allows, these individuals could make a maximum contribution of $34,750. Catch-up contributions are in addition to the employee and employer contributions.
Contribution limits are the same for both Traditional (pre-tax) and Roth (post-tax) 401(k) plans.
401(k), 403(b) & 457(b) Plan Limits
Roth Catch-Up Wage Threshold
It’s also important to note that starting in 2026, those making more than $145,000 in the previous year must make catch-up contributions to a Roth 401(k) (i.e., post-tax) contributions. So, while employees will have to pay taxes on these contributions now, their qualified withdrawals in retirement will be tax-free. Employees making $145,000 or less can continue contributing to their Traditional 401(k)s (i.e., pre-tax).
As the plan sponsor, you should communicate this limitation to employees to ensure they understand the tax implications of their contributions.
IRA Contribution Limits
IRAs offer alternatives for those who don’t have access to an employer-sponsored plan, like self-employed individuals and small business owners. Although our article primarily focuses on 401(k) contribution limits, knowing the IRA contribution limits is essential to understanding your business’s options and keeping employees informed, especially those who may be contributing to both a 401(k) and an IRA.
The 2025 IRA contribution limit remains at $7,000, and the catch-up contribution limit for those aged 50 and over remains at $1,000. These limits apply to both Traditional and Roth IRAs, while SIMPLE and SEP IRA plans have specific limits.
Individuals can also make deductible contributions to Traditional IRAs, subject to income phase-out ranges. These ranges vary based on whether filers are single or married and if they are covered by a workplace retirement plan or not. Refer to the IRS for more details on these income and contribution limits.
Keep Up With Retirement Contribution Plan Limits
As a 401(k) plan sponsor, understanding the 2025 retirement contribution limits is vital. These annual adjustments affect how much employees can save for retirement and could even have significant tax implications. When you understand the limits and their impact, you can keep plan documents and operations updated and compliant while helping employees maximize their retirement savings and take full advantage of their tax benefits.
Do you have questions about retirement contribution limits or overall 401(k) plans? Speak with an FSRP advisor today to learn how we can help!
Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Financial Strategies Retirement Partners (FSRP) is a Registered Investment Adviser. Financial planning services offered by FSRP are separate and unrelated to Commonwealth.