The IRS has Announced Changes to SIMPLE IRAs and Other IRA Contribution Limits for 2025

Last Friday, the IRS announced an increase in the amount of tax-favored funds you can stock up on your qualified retirement plans (401(K) and other similar plans) for 2025. This means you have a greater opportunity to save more for your future. The IRS adjusts these limits annually to keep pace with inflation, and this marks the third consecutive year of increases for 401(k) plans.

But what about your IRA?

Here is the contribution for IRA plans in 2025

SIMPLE IRA Contribution Limits for 2025

SIMPLE IRAs, (Savings Incentive Match Plan for Employees) are specifically designed for small businesses with 100 or fewer employees. Similar to 401(k) plans, both employees and employers can contribute, making it a popular choice for smaller companies.

For 2025, the contribution limit for SIMPLE IRAs will increase from $16,000 to $16,500. If you’re over 50, you can take advantage of catch-up contributions, which remain unchanged at $3,500. This brings the total potential contribution for individuals aged 50 and above to $20,000.

Additionally, starting in 2025, employees aged 60 to 63 who participate in SIMPLE plans will benefit from a higher catch-up contribution limit of $5,250.

Traditional IRA Contribution Limits for 2025

For 2025, there are no significant changes to the contribution limits for Traditional IRAs. You can still contribute up to $7,000 per year if you’re under the age of 50. If you’re age 50 or older, you can take advantage of the catch-up contribution, which allows you to contribute an additional $1,000, bringing your total potential contribution to $8,000. This feature is designed to help you boost your retirement savings as you approach retirement age.

With a traditional IRA, contributions are tax-advantaged. If you meet the criteria—that’s where these limits come into play—contributions will be tax-deductible, resulting in a lower tax bill.

In addition to the contribution limits, it's important to understand the phase-out rules that apply to tax deductions for Traditional IRA contributions. A phase-out occurs when your income exceeds a certain level, reducing or eliminating your ability to deduct your contributions from your taxable income. Here are the phase-out ranges for 2025:

• Single Taxpayers: If you’re covered by a workplace retirement plan, the phase-out range is $79,000 to $89,000. This is an increase from $77,000 to $87,000 in 2024.
• Married Couples Filing Jointly: If one spouse contributes to a Traditional IRA and is covered by a workplace retirement plan, the phase-out range increases to $126,000 to $146,000, up from $123,000 to $143,000 in the previous year.
• Married Individuals Not Covered by a Workplace Retirement Plan: If you’re married to someone who is covered, the phase-out range is now $236,000 to $246,000, which is an increase from $230,000 to $240,000 in 2024.
• Married Individuals Filing Separately: If you’re covered by a workplace retirement plan, the phase-out range remains unchanged at $0 to $10,000. This range does not change annually as it is not subject to cost-of-living adjustments.

No Phase-Outs for Uncovered Individuals

It's also important to note that if neither you nor your spouse is covered by a workplace retirement plan, the phase-out rules do not apply to your deductions. This means you can deduct the full amount of your contributions to a Traditional IRA, regardless of your income level.

Roth IRA Contribution Limits for 2025

Like Traditional IRAs, the annual contribution limit for Roth IRAs remains at $7,000 for 2025, with a catch-up contribution of $1,000 for individuals aged 50 and older. This means that if you qualify, you could contribute up to $8,000 a year.

However, eligibility for making the maximum contribution depends on your modified adjusted gross income (MAGI). For 2025, the MAGI thresholds are as follows:

• Single and Head of Household filers: The limit has increased to $150,000 (up from $146,000) for full contributions.
• Married filing jointly: The phase-out range is now $236,000 to $246,000 (up from $230,000 to $240,000).

Take Advantage of the Increased Limits

With these new contribution limits, it’s a fantastic time to ramp up your retirement savings. If you’re looking for an effective way to save for retirement without the administrative headaches associated with other employer-sponsored plans, a SIMPLE IRA might be the right fit for you.

Setting up a SIMPLE IRA can seem daunting, involving paperwork and manual processes. But what if there was software that simplifies this for you?

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