When it comes to saving for retirement, there are numerous ways, but the two most frequent are to begin saving as soon as feasible or to save as much as possible as you approach retirement. Because many people have debt and responsibilities at the outset of their careers, as well as lower salaries, the Internal Revenue Service (IRS) has a few measures to help older folks save more quickly before retirement.
The effort may appear useless, as statistics from Vanguard’s How America Saves study shows that only 14% of employees presently maximize their contributions to employer retirement plans. This is depressing because most Americans do not have enough retirement savings, and employer-matched plans are one of the simplest ways to supplement their accounts.
There is a clear disparity between the reality of retirement savings and the options provided by employers and the IRS to employees. However, the additional options for older adults may help bridge this gap, as they often have better salaries and less debt, making contributing to retirement accounts more practical for those who are already planning to leave the job.
The new IRS retirement savings limit
First and foremost, 401(k)s, 403(b)s, governmental 457 plans, and the federal government’s Thrift Savings Plan will see an increase in the annual employee deferral limit for workplace plans from $23,000 to $23,500. However, the real shift occurs for those aged 60 to 63.
The catch-up contribution maximum for workers aged 50 and older remains at $7,500, allowing a total contribution of up to $31,000 in 2025, which they should take advantage of; however, there is an additional layer of contributions known as the “super catch-up contribution” that is being increased.
For employees aged 60 to 63, the new super catch-up contribution is limited to $11,250. Employers will need to adjust their plans to accommodate this increased contribution, which is intended to help those reaching retirement age save as much as possible.
Richard Pon, a certified public accountant headquartered in San Francisco, California, underlines the significance of employer involvement in this new provision. He also points out, “Once you hit age 64, you are no longer eligible for a super catch-up contribution and are limited to the regular catch-up contribution amount.”
This means that persons between the ages of 60 and 63 should act quickly and begin making contributions in order to properly plan for retirement funds.
Other IRS changes in 2025
Along with modifications to corporate retirement plans, income ranges for traditional and Roth IRA contributions have been changed to reflect cost-of-living improvements. This will also allow more taxpayers to benefit from tax-advantaged retirement savings.
- For single taxpayers covered by a workplace retirement plan, the phase-out range for IRA contributions has increased to between $79,000 and $89,000
- Married couples filing jointly will also see changes, with the phase-out range for IRA contributions rising to $126,000 to $146,000
- For singles and heads of household the income phase-out range for Roth IRA contributions is now set at $150,000 to $165,000.
- For married couples filing jointly the income phase-out range for Roth IRA contributions is $236,000 to $246,000.
The final significant change that taxpayers should be aware of is the increase in the income limit for the Saver’s Credit, also known as the Retirement Savings Contributions Credit, which has been raised to $79,000 for married couples filing jointly in order to encourage and support low- and moderate-income workers in their efforts to save for retirement.
Knowing about these changes can help contributors make better use of their money and save for retirement.