2025 Changes to Retirement Plans

Here are some changes for retirement plans you can expect to see in 2025:

1. IRA and 401k contribution limits increase

Contribution limits for traditional and Roth IRAs are going up in 2025. The limit on annual contributions to an IRA rises to $7,000, which is up from $6,500. Catch-up contributions for taxpayers aged 50-plus are subject to cost-of-living adjustments (COLA), but these limits remain unchanged for 2025 at $1,000, or $8,000 in total contributions.

Contribution limits are also going up for 401k and other employer-sponsored plans in 2025. Limits for 401k, 403b, most 457 plans and the federal government’s Thrift Savings Plan will bump up from $23,000 to $23,500. Employees aged 50 and older can make up to $7,500 in catch-up contributions on top of the $23,500 limit, bringing the total contribution limit to $31,000 in 2025. Employees aged 60 to 63 get an even bigger catch-up contribution limit of $11,250, a 14% increase from 2024.

Check out the IRS site to read the full scoop on these changes.

2. SIMPLE IRAs and catch-up contributions for people aged 60 to 63

In 2025, there will be an increase in the catch-up contribution limits for participants aged 60 through 63. The new limit will increase to the greater of $5,000 or 150% of the standard age 50 catch-up contribution limit for SIMPLE IRA plans in 2025. Those aged 60 to 63 can now contribute $5,250 more to SIMPLE plans for 2025. Additional cost of living adjustments will begin in 2026.

3. Annual employee deferrals to SIMPLE IRAs

In 2025, the contribution limit for annual employee deferrals to SIMPLE IRAs increases by $500 to $16,500. The catch-up contribution of $3,500 for individuals aged 50 or older remains unchanged.

4. New 10-year rule for inherited IRAs takes effect

If you inherited an IRA from someone who died on or after Jan. 1, 2020, you must withdraw all funds in the IRA no later than Dec. 31 of the tenth full calendar year following the death of the individual from whom you inherited the IRA. This rule removes the “stretch IRA”’ strategy that had allowed IRA owners to pass assets in the account from one generation to the next while taking advantage of prolonged tax-deferred growth of the assets by using a prolonged distribution period.

However, the following four beneficiaries can still utilize the “stretch IRA”:

• Surviving spouses
• A child of the decedent under age of 21
• A beneficiary who is not more than 10 years younger than the decedent
• An individual who is disabled or chronically ill

6. A new retirement savings “lost and found”

To help retirees find retirement benefits lost through various work positions held throughout their lives, the SECURE 2.0 Act created a searchable database. The Employee Benefits Security Administration (EBSA) is responsible for gathering and uploading the information provided by plan administrators.

The EBSA only started accepting data on Nov. 18, 2024. It’s a good idea to check the database on a regular basis for updates.

Use this guide to learn what you need to know about changes to retirement plans in 2025.