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Planning For 2025: Retirement Plans & HSA Contribution Limits

December 3, 2024

It's always a good time to plan for your financial future. As the upcoming new year approaches, it provides a good reason to consider the new contribution limits for retirement plans and health savings accounts (HSAs) in 2025.

Retirement Plan Contributions

The IRS recently announced that beginning in 2025, taxpayers will be allowed to contribute an additional $500 into their 401(k), 403(b) and most 457 plans. The 2025 contribution limit for these retirement plans will increase from the current level of $23,000 to $23,500.

Individuals age 50 and above are also eligible for catch-up contributions to their 401(k), 403(b) and most 457 plans. This means that these individuals can contribute above the $23,500 limit. The 2025 catch-up contribution limit will remain $7,500. In total, employees age 50 and above can contribute up to $31,000 in these retirement plans.

New in 2025, individuals between the ages of 60 to 63 can make enhanced catch-up contributions of up to $11,250 to their 401(k) and 403(b) plans, bringing the total potential contribution to $34,750. The enhanced catch-up contributions outlined in the Secure 2.0 Act do not apply to 457(b)s. However, 457(b) plans have their own unique final three-year catch-up provision that may allow for even greater contributions if you're within three years of the plan's normal retirement age. We encourage you to speak with your advisor if you have questions.

The limits for IRA/Roth-IRA contributions in 2025 will remain the same (up to $7,000 per year). The IRA /Roth IRA catch-up contributions for individuals age 50 and above will remain $1,000. In total, employees age 50 and above can contribute up to $8,000 in their IRAs/Roth-IRAs. There is no enhanced catch-up contribution for IRAs and Roth IRAs.

Additionally, recent legislation has also made changes to HSAs contribution limits in 2025. Below are several of the important highlights to note.

Higher Health Savings Account (HSA) Limits In 2025

 

Individuals

  • In 2025, the maximum annual contribution amount is $4,300 for an individual (up from $4,150 in 2024).
  • The catch-up contribution amount for those age 55 or older is $1,000 per year.

Families:

  • For families, the maximum annual contribution amount is $8,550 per year in 2025 (up from $8,300 in 2024).
  • For a family in the 35% marginal tax bracket, a maximum contribution can result in a federal income tax saving of nearly $3,000 plus any state income tax and other benefits.

Almost anyone enrolled in a high deductible health plan that is HSA-qualified can set-up an HSA and benefit from the tax advantage. HSAs are an increasingly popular tax-favored benefit for workers and their families.

While there are many pages to the tax code, these are some of the ways that you and your family can benefit in 2025 to potentially reduce your tax bill. We are more than happy to collaborate with you and your tax advisor on planning strategies for 2025.

If you have questions about your specific financial planning or investment strategy needs, we welcome you to Contact Us to set up time to discuss further.

Disclosures:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor. 

https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000