Individual retirement accounts – better known as IRAs – are an important saving tool for many people. The IRS determines the maximum contribution for each type of IRA annually, and they recently announced the updated limits for tax year 2025. Take the time to understand the new limits and factor them into your financial plan.
IRA Contribution Limits for 2025
The IRS reviews inflation data each year and determines whether IRA contribution limits should be increased. This year, they chose to leave contribution limits unchanged for traditional and Roth accounts but raise limits for employer sponsored IRAs.
Traditional And Roth IRA Contribution Limits
Next year, you’ll be able to contribute up to $7,000 to a traditional, Roth, or a combination of those two types of IRAs. If you are age 50 or older, you are subject to a higher contribution amount to allow for catch-up. This amount will remain at $1,000 in 2025, bringing your total allowable contribution to $8,000.
SIMPLE IRA Contribution Limits
If your employer sponsors a SIMPLE IRA, you will be able to contribute more next year. The maximum contribution was raised from $16,000 to $16,500.
Like traditional and Roth IRAs, SIMPLE plans also allow for catch-up contributions for those nearing retirement age. The amount of these catch-up contributions will change to a new structure in 2025.
If you are over age 50, you will be able to contribute an additional $3,500 – the same amount as last year. Due to recent legislative changes, the catch-up contribution limit for those who are aged 60, 61, 62, and 63 will be $5,250. Going forward, these amounts will be indexed for inflation each year.
SEP IRA Contribution Limits
If you are self-employed, you may have established a SEP IRA. Contribution limits for these accounts will also increase for tax year 2025. You will be able to contribute up to $70,000 – a $1,000 increase from the previous year.
See the table below for a summary of 2025 IRA contribution limits.
Past IRA Contribution Limits
Because the IRS reviews price data each year before determining the IRA contribution limits, the changes in these limits tend to follow the path of inflation. With a high inflation rate in the past several years, IRA limits have increased steadily, as shown by the chart below.
Traditional And Roth Contribution Limits In 2024
As you factor the new contribution limits into your financial plan, keep in mind that there is still time to contribute for the current year. Traditional and Roth IRA contributions can be made until the tax filing deadline – Monday, April 15, 2025.
For the current year, you can contribute up to $7,000 to a traditional, Roth, or a combination of those types of IRAs. If you are age 50 or older, you can also contribute an additional $1,000 as a catch-up contribution, bringing your total allowable addition to $8,000.
As you plan your contributions, don’t forget to account for the deductibility rules for traditional IRAs and the income limit for Roth IRAs. You can find these amounts in our article IRA Contribution Limits in 2024.
Traditional IRA Deductibility Limits in 2025
In general, most people choose a traditional IRA over a Roth IRA when they want to deduct contributions from their income. However, the IRS imposes limits on who can deduct their additions based on filing status, income, and whether you or your spouse are covered by a retirement plan at work.
The chart below summarizes deductibility limits for traditional IRAs in 2025.
Roth IRA Income Limits in 2025
Most people choose a Roth IRA over a traditional account when they want tax-free growth. However, unlike traditional IRAs, you can only contribute to a Roth IRA if your income is below a certain limit.
Roth IRA income limits were adjusted for inflation for tax year 2025. See the chart below for a summary of the new income limits.
If your income is above the limit, you may be able to employ a strategy called a back-door contribution to add money to a Roth IRA. This strategy has important caveats, so be sure to discuss it with an experienced financial advisor before implementing it.
Adjust Your Financial Plan to Account for New IRA Limits
If you are planning to contribute more to your IRA in 2025, you may need to manually update your automatic contributions. That’s because most sponsors don’t have an option to select that you’d like to maximize your plan. Instead, you must choose a specific dollar amount to contribute. Be sure to update your contributions as soon as possible to maximize potential growth from your investments.
As you review and update your IRA contributions, take the time to consider your retirement goals and how your savings strategy supports them. An experienced financial advisor can make this process seamless and help you weigh the tax implications of various accounts with your overall goals.
Partner With Meld for A Winning Retirement Strategy
At Meld Financial, our team of tax, legal, and investment professionals can help you turn your retirement goals into a reality. We will review your entire retirement plan including which accounts you use to save, the tax implications, and the amount you contribute each year.
Once we understand your current situation, we will develop your Financial Fingerprint® – a comprehensive wealth management plan that brings together the most important aspects of your financial life. With your Financial Fingerprint® and an ongoing relationship with an experienced financial advisor, you will have the tools you need to achieve your dream retirement.
To discuss your retirement plan and get your Financial Fingerprint®, contact a member of our team today.
