I am always amazed when I learn that people do not save as much as they can in their workplace 401K, at least enough to get their company match, if any. Deferred contributions lower your income tax bill, and the money compounds free of taxes until retirement. In some cases, as with a Roth 401K or Roth IRA, you can pay the tax now and then the gains compound without taxes in perpetuity. I did variations of this for more than 30 years, saving a large percentage of my income and living below my means, which allowed me to comfortably retire this year.

Most years, the IRS limit goes up, and 2025 is no exeption, thanks to the bipartisan Secure 2.0 act signed into law by President Biden in December 2022. Here are the full details.

The annual contribution limit for employees who participate in 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $23,500 in 2025, up from $23,000. If you are 50 or older, the catch-up contribution limit will increase to to $31,000 next year. The limit on annual contributions to an IRA remains at $7,000, with an additional $1,000 catch-up for people older than 50. If you are closer to retirement — 60, 61, 62 and 63 — there are additional catch-up amounts. Consult your plan.

Income ranges for eligibility to make deductible IRA contributions or to contribute to Roth IRAs and claim a saver’s credit will all increase, among other changes. Details at the link.