When it comes to retirement savings, people generally have two strategies: start saving as early as possible or focus on maximizing contributions as retirement approaches. Many younger workers struggle to save early due to debt, responsibilities, and lower salaries, which can delay their retirement savings. Recognizing these challenges, the IRS offers provisions specifically designed to help older workers save more aggressively as they near retirement age.
According to Vanguard’s How America Saves report, only 14% of employees currently maximize their contributions to workplace retirement plans, despite employer matches that could help boost retirement savings. This underscores a significant disconnect between retirement savings potential and actual contribution levels. However, recent IRS changes may make it easier for older workers to increase their savings in their final working years, especially as they often have higher incomes and fewer financial obligations.
Increased Retirement
In 2025, retirement contribution limits will increase for popular plans like 401(k)s, 403(b)s, governmental 457 plans, and the federal Thrift Savings Plan. The annual employee deferral limit for these plans will rise from $23,000 to $23,500.
The most significant change affects those aged 60 to 63. In addition to the regular “catch-up contribution” limit for employees over 50, which remains at $7,500, there’s a new “super catch-up contribution” provision for employees in the 60–63 age range. This new tier allows these employees to contribute an additional $11,250, raising their total potential contribution to $34,750.
Richard Pon, a certified public accountant in San Francisco, emphasizes that those eligible should act fast to maximize these contributions, as the “super catch-up” option is only available until age 63. After that, the additional limit reverts to the regular catch-up amount, which is still beneficial but doesn’t provide the same savings power as the super catch-up tier.
Adjustments
In addition to workplace retirement plans, the IRS has adjusted income thresholds for traditional and Roth IRA contributions to account for cost-of-living increases. These changes allow more taxpayers to contribute to IRAs and benefit from tax-advantaged retirement savings options.
Here’s a breakdown of the new IRA phase-out ranges for 2025:
| Filing Status | IRA Contribution Phase-Out Range | Roth IRA Contribution Phase-Out Range |
|---|---|---|
| Single or Head of Household | $79,000 – $89,000 | $150,000 – $165,000 |
| Married Filing Jointly (IRA) | $126,000 – $146,000 | $236,000 – $246,000 |
| Married Filing Jointly (Roth IRA) | Not applicable | $236,000 – $246,000 |
These adjustments mean that a greater number of taxpayers may now qualify for tax deductions or Roth IRA contributions, boosting their retirement savings potential.
Saver’s Credit Income
Another key change is an increase in the income limit for the Saver’s Credit, also known as the Retirement Savings Contributions Credit. For married couples filing jointly, this limit has increased to $79,000, making it easier for low- and moderate-income workers to benefit from tax credits when saving for retirement.
The Saver’s Credit provides a tax credit of up to 50% of retirement contributions, depending on income, making it a valuable resource for those who need extra motivation to start or continue saving for retirement.
Changes Matter
The IRS’s updates to retirement contribution limits and income phase-outs are designed to help workers, especially those nearing retirement, make the most of their remaining working years.
With the higher contribution limits, particularly the new super catch-up tier for employees aged 60–63, individuals can accelerate their savings significantly before they leave the workforce. This targeted approach allows older adults to catch up on savings and build a stronger retirement cushion.
FAQs
What is the new 401(k) contribution limit for 2025?
The new limit is $23,500 for 401(k)s, 403(b)s, governmental 457 plans, and the Thrift Savings Plan.
What is the super catch-up contribution?
For those aged 60-63, a super catch-up allows an additional $11,250 in contributions.
What is the IRA income phase-out range for singles in 2025?
The range is $79,000 to $89,000 for traditional IRA contributions.
What is the new Roth IRA income limit for married couples in 2025?
The income limit for Roth IRA contributions for married couples is $236,000 to $246,000.
What is the Saver’s Credit income limit for 2025?
The income limit for Saver’s Credit for married couples filing jointly is $79,000.
