IRA Contribution Rules Are Changing in 2025. Here's What That Means for You

The SECURE 2.0 Act was signed into law a few years ago, but some of its most significant changes to retirement accounts like IRAs haven't taken effect just yet. In fact, some major changes are scheduled to begin in 2025.

For example, newly established 401(k) plans will now be required to have an automatic enrollment feature. And the rules governing inherited IRAs will require certain types of beneficiaries to withdraw money from the account faster.

In addition to these, there are a few changes that will impact IRA contributions. Here's what you need to know.

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Larger catch-up contributions for older savers

If you're self-employed or work for a small business that offers SIMPLE IRA accounts to employees, the catch-up contribution rules are changing in 2025.

There is already a catch-up provision in place for SIMPLE IRAs. In 2024, the SIMPLE IRA limit is $16,000 for employee deferrals, with another $3,500 allowed for individuals age 50 or older.

In addition, there will now be a higher catch-up limit for participants who are 60 to 63 years old. This group will be allowed a catch-up contribution of $5,000 or 150% of the standard SIMPLE IRA catch-up contribution, whichever is greater. These numbers will be indexed for inflation starting in 2026.

There's a similar catch-up provision for 401(k)s for those in the 60-63 age group, which increases the catch-up contribution to $10,000 or 150% of the standard catch-up contribution, whichever is greater.

IRA catch-up contributions will be linked to inflation

Technically speaking, this rule change happened last year, but it didn't actually change anything just yet. I'm talking about the catch-up contributions for traditional and Roth IRAs.

If you aren't familiar, there are two components to the IRA contribution limits each year. There's a standard contribution limit that applies to everyone, and a catch-up contribution that applies to people age 50 or older. For 2024, the standard contribution limit is $7,000 and the catch-up contribution adds $1,000.

The standard IRA contribution limit is adjusted for inflation over time. For example, it increased from $6,500 in 2023 to $7,000 in 2024. However, the catch-up limit has been $1,000 for years and has not been linked to inflation -- until now.

The SECURE Act 2.0 included an annual cost-of-living adjustment for the IRA catch-up contribution starting in 2024. It remained $1,000 in 2024, but it could certainly rise in 2025 (or for 2026, which will be announced in late 2025).

There's a big (potential) change we don't know just yet

The IRS has yet to announce 2025 retirement account contribution limits. Based on recent inflation figures, we can get a good idea of what to expect, but we haven't officially learned the new limits yet.

For the 2024 changes, the IRS released its official figures on Nov. 1, 2023, so it would be fair to expect a similar timetable for this year. Inflation has cooled off over the past year or so, and the most likely scenario will be a $7,000 standard and $1,000 catch-up contribution yet again in 2025 for traditional and Roth IRAs, and slight increases in the limits for SEP IRA and SIMPLE IRA accounts, but we'll have to wait for official word from the IRS.