03/21/2025
The Internal Revenue Service has announced key changes to retirement contribution limits for 2025.
Here’s what you need to know:.
Workplace Retirement Updates:
▪️ 401(k) contribution limit increases to $23,500
▪️ Special catch-up provision for ages 60-63: up to $11,250 in additional contributions
▪️Standard catch-up amount remains $7,500 for those 50+
Individual Retirement Account (IRA) Changes:
▪️ Annual contribution limit stays at $7,000
▪️ Traditional IRA phase-out range expands: $79,000-$89,000 for individuals
▪️ Roth IRA phase-out range increases: $150,000-$165,000 for individuals
▪️ Married filing jointly Roth phase-out: $236,000-$246,000
These adjustments could affect your retirement strategy. Want to discuss how to make the most of these opportunities?
Remember, once you turn 73, you must take required minimum distributions (RMDs) from your 401(k) or other defined contribution plans in most cases. Withdrawals from these plans are taxed as ordinary income and may be subject to a 10% federal income tax penalty if taken before age 59½.
Similarly, once you reach age 73, you must begin taking RMDs from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.
With a Roth IRA, to qualify for tax-free and penalty-free withdrawal of earnings, distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.
