Maximum Retirement Plan Contributions

A retirement plan is a financial account designed to help you save for retirement. There are several types of plans, including IRAs, 401(k)s, 403(b)s, SIMPLE IRAs and Simple 401(k), and Roth IRAs. Each has its own rules about how much you can contribute each year.

The Limits on Contributions into Retirement Plans

Understanding these limits is crucial for maximizing your retirement savings and taking full advantage of tax benefits. Be sure to stay updated on any changes to these limits each year!

KEY TAKEAWAYS

For 2025, the contribution limits are as follows:

1. 401(k) and 403(b) Employee Contribution Limit: Under age 50 = $23,500; age 50+ 401(k) = $31,000 (or $7,500 catch-up); age 60-63 by Dec. 31, 2025, = $34,750 ($11,250 catch-up)
2. Traditional and Roth IRA Contribution Limits: IRA contribution limits: $7,000 and catch-up contributions $8,000 if age 50+
3. SEP-IRA Contribution Limit: $70,000
4. SIMPLE IRA and SIMPLE 401(k) Contribution Limits: $16,500
5. 457(b) Contribution Limit: $23,500 (contact your admin about catch-up limits)

• Different retirement plans may have unique rules or additional benefits, such as loan provisions or early withdrawal options. It's essential to understand the specific rules of your retirement plan to maximize its benefits.
• High earners might not qualify to contribute directly to a Roth IRA. They can use the backdoor Roth IRA strategy, which involves contributing to a traditional IRA and then converting those funds to a Roth IRA.

2025 Contribution Limit Increases

Below a comparison of contribution limit changes between tax year 2024 and 2025.

Employee Contributions to Retirement Plans

You can contribute to your retirement account through your employer and/or on your own. There are four types of contributions that employees can make to retirement plans:

1) Elective Deferral Contributions

Also called salary reduction contributions, these are the most common types of contributions to retirement plans. You elect to have money deducted from your salary each pay period and contributed to your retirement account. Pre-tax dollars are contributed, which means that the money does not have any tax withheld from it before it is put in the retirement account. In most cases, a percentage of pay is contributed, but in some plans, you can contribute a set dollar amount. Money that is contributed in this way is not reported as taxable income. For each year, there is a limit on the amount of deferrals.

2) Designated Roth Contributions

A designated Roth contribution is similar to an elective deferral, except the amount deferred is taxable as normal income. You choose to contribute a set percentage or amount of your salary per pay period, but you use taxable income. You do not exclude Roth contributions from your income on your tax return. The main benefit of a Roth account is that qualified distributions are non-taxable.

3) After-Tax Contributions

Not all retirement plans allow after-tax contributions. These are generally non-Roth contributions that you choose to make in addition to your regular elective deferrals of salary. If your plan allows after-tax contributions, any contributions that you make must be included in your taxable income. After-tax contributions may not be deducted, either.

4) Catch-up Contributions

Many, but not all, retirement plans allow catch-up contributions. If you are at least age 50 by the end of the year, you may be able to make additional, nontaxable, elective deferrals beyond the basic limit on contributions. If your plan allows it and you qualify, you can make these contributions up to the catch-up contribution limit even if you have made regular deferrals up to the regular limit.

Catch-up contributions are a good option for those who perhaps did not contribute a lot to their plans in the past, for those who waited until later in life to start saving for retirement, and for those who just want to ensure a comfortable retirement.

After the tax year, you may be issued a Form 5498 which reports your contributions. Form 5498 is an informational copy and generally does not need to be reported on your tax return. You should also see your retirement account contributions reported on your W-2 is you are an employee. See more details on the IRA contribution and income limit page.

When you prepare and e-file your current year tax return on eFile.com, you do not have to worry about how your contributions affect your taxes. Once you answer a few simple questions, the eFile tax app will select the right retirement tax forms and schedules for you based on your answers. For example, the tax app will automatically calculate the Saver's Tax Credit if you qualify for it.

Employer Contributions

Employers can make two different kinds of contributions to retirement plans:

1) Matching Contributions

In most retirement plans, your employer can make contributions, or elective deferrals, to your account on your behalf. In some plans, employer contributions are mandatory; in other plans, they are discretionary (optional).

Elective deferrals by employers are called matching contributions because the employer matches a certain amount per dollar contributed by the employee. For example, your employer might contribute 50% of your contributions, which means an additional $0.50 for every dollar you contribute. The matching amounts vary according to plan and employer. Matching employer contributions are not taxable income (though the amount may be shown on your W-2).

2) Discretionary Contributions

Discretionary, or non-elective, employer contributions are allowed by some retirement plans. These are contributions made in addition to matching contributions at the employer's discretion. Such a contribution must be made equally to every employee covered by the plan; it cannot be made only to certain individuals. Discretionary contributions by employers are generally nontaxable income for you.

Is there a limit to the IRA contribution deduction?

If you are covered by a workplace retirement plan, then your IRA contribution deduction may be limited based on your adjusted gross income (AGI) and filing status. The table below shows the deduction you may be able to claim based on your filing status and AGI—the eFile Tax App will determine this for you as you enter data so you will never accidentally claim a deduction you are not entitled to nor miss a deduction you should have claimed.

Backdoor Roth IRA Explained

You may not be able to contribute to a Roth IRA if you make over a certain amount, but there is strategy you may consider. Backdoor Roth IRA contributions work by establishing a traditional IRA with more lenient restrictions on contributions to that account before rolling over those funds to your Roth account. You will pay taxes on this amount, but once in your Roth account, the funds grow tax free. This method is perfectly legal as far as the IRS tax codes and laws are concerned.

Contribution Limits

The government imposes limits on how much money employers and employees (and the self-employed) can contribute to retirement plans. There is a maximum limit for each type of retirement plan—some change each year. The tables below summarize the applicable limits for recent years for most employer-sponsored retirement plans (not including pensions—see the pension plan limits). "Overall contributions" include all deferrals, employer contributions, and catch-up contributions. There are different limits for different defined contribution plans, so we recommend consulting your plan administrator for the exact figures.

401(k), 403(b), and 457 Plans

For the following plans, the table is organized by tax year, compensation, deferral/contribution limits, the catch-up limit, and the overall contribution limit. Compensation is the maximum limit for calculating contributions; the deferral/contributions limits are the total amount an employee can defer or contribute to a retirement plan. The overall amount is the total possible amount when considering the employee's contributions and total employer contributions (typically, around 50% off the employee's contributions). The overall column excludes the additional, potential catch-up amount.

If Contributions are Over the Limit: If deferrals were made that are over the contribution limit, they are called excess deferrals. Excess deferrals should be reported to your employer or plan administrator. You may request that the amount of your excess deferrals be paid out to you. The plan will have until April 15 of the following year, at the latest, to pay you the total amount of your excess deferrals.

After this, one of two things will happen:

1. You withdraw the excess deferral amount on or before April 15 of the following year. In this case, the amount is not included in your gross income for the year and is not taxable income.
2. You withdraw the excess deferral amount AFTER April 15 of the following year. Then, the amount must be included in your taxable income for the year in which it was deferred or contributed. The income may then effectively be double-taxed: once when it is contributed and again when it is withdrawn later. Also, when you do withdraw the money, it may be considered an early withdrawal and come with a penalty. But if you leave the money in the plan indefinitely, the plan may no longer be considered qualified for tax benefits.

Pension Plan Limitations: Pension plans, or annuities, are a type of retirement plan, but they are not the same thing as a 401(k), an IRA, or other, more common retirement plans covered above. See the contribution limits for pension plans.

More Retirement Tax Information

• Retirement plans and tax benefits
• Retirement plan distributions
• Retirement plan contribution limits
• Social Security and taxes
• Contribution limits on pension plans
• Saver's Tax Credit, credit for retirement contributions.

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