The IRS is expected to announce 2025 401(k) contribution limits later this week, given that all the inflation data needed to calculate next year’s limits is now in the books and last year the announcement was made on Nov. 1 (which would be Friday this year).
In the final projections from both Mercer and Milliman, the amount of the increase for 401(k), 403(b) and eligible 457 plan elective deferrals (and designated Roth contributions) was forecast to be either $500 or $1,000—increasing from $23,000 in 2024 to either $23,500 or $24,000, depending on September inflation figures that were released earlier this month.
The final Mercer projection before the official announcement said a moderate but not unusual amount of inflation in September would result in the higher limit, but that doesn’t appear to be the case.
The final Milliman forecast released back in September noted that if the change in Consumer Price Index in September was more than 0.25%, the 2024 maximum deferral for DC plans for those under 50 would be $24,000 instead of $23,500. But with the CPI increase for the month coming in at a seasonally adjusted 0.2%, it is expected that the 2025 401(k) limit will increase $500 instead of $1,000.
Yet another prognostication, from The White Coat Investor, pegged the increase at $500 and not $1,000, in late September post.
When it comes to the maximum annual addition for defined contribution (DC) plans—the 415(c) DC plan maximum annual addition including employee and employer contributions—forecasts are calling for it to be raised to $70,000, which would be a $1,000 increase from the 2024 limit of $69,000.
“The maximum amount between the employer and employee that can be contributed in 2025 to a DC plan is increasing to $70,000, but this limit does not include catch-up contributions,” Nina Lantz, a principal at Milliman and Director of Employee Benefits Research, told 401(k) Specialist in September. “The SECURE 2.0 Act allows plans to raise the catch-up contribution limit for participants aged 60 to 63. Starting in 2025, these participants may be able to make catch-up contributions of up to $11,250, a significant jump from the current $7,500, providing even more opportunities to save for retirement.”
According to The White Coat Investor post, 2025 traditional and Roth IRA contribution limits and catch-up contributions will remain the same from 2024, meaning account holders can contribute $7,000 or $8,000 if you’re 50 in 2025. SEP-IRA contribution limits in 2025 will increase to $70,000 per year, up from $69,000 in 2024. The SIMPLE IRA and SIMPLE 401(k) contribution limits will increase from $16,000 in 2024 to $16,500 in 2025.
In the official announcement, the IRS will also issue technical guidance regarding all of the cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2025.
SEE ALSO:
• IRS Gives 2025 401(k) Contribution Limit a $500 Boost
• 2025 401(k) Contribution Limits: Milliman Halves its Increase Prediction
• 2025 401(k) Contribution Limit Forecast: $1,000 Increase on Tap?
• IRS Bumps 2024 401(k) Contribution Limit to $23,000
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
