4 Retirement Account Updates You Need to Know for 2025

Dec 27

Big changes are coming to retirement accounts in 2025, and if you're saving for the future, these updates can help you save more, grow your money faster, and keep more of what you earn. Let's break it all down—no jargon, no confusion.

1. Higher 401(k) Contribution Limits

Starting in 2025, you can save even more in your 401(k). The new contribution limit is $23,500 (up from $23,000 in 2024).

If you’re 50 or older, you can add a $7,500 "catch-up contribution", making your total savings limit $31,000.

But here’s where it gets really interesting: If you’re aged 60–63, you can contribute an extra $11,250, bringing your total to $34,750 for the year.

What It Means for You:

More opportunity to invest: These increased limits are designed to help you boost your retirement savings during your highest-earning years.
Catch-up if you're behind: If you're in your 60s, this is your chance to supercharge your savings.

2. Roth IRA Income Limits Are Increasing

Roth IRAs are retirement accounts where your money grows tax-free, and you don’t pay taxes when you take it out later. But there’s a catch: You can only contribute to a Roth IRA if you earn under a certain amount.

For 2025, the income limits are increasing, which means more people will qualify. Here's how it breaks down:

Single or Head of Household: You can contribute the full amount if you make less than $150,000. If you make between $150,000–$165,000, you can contribute a smaller (partial) amount. Above $165,000, you can’t contribute.
Married Filing Jointly: Full contributions are allowed if you earn under $236,000. Partial contributions are allowed if your income is between $236,000–$246,000. Above $246,000, you're out of luck.

What “Phase-Out Range” Means:

Think of the phase-out range as a sliding scale. If your income falls in the range (e.g., $150,000–$165,000 for singles), you can contribute less than the maximum but more than zero. The closer you are to the upper limit, the smaller your contribution amount will be.

What It Means for You:

More access to Roth IRAs: If your income is near these limits, the increase gives you a chance to start or keep contributing to a Roth IRA.
Tax-free withdrawals: Roth IRAs are a powerful tool for retirement since you won’t pay taxes on withdrawals.

3. Traditional IRA Deduction Limits Are Expanding

A traditional IRA lets you save for retirement and potentially lower your taxable income. But whether you can deduct your contributions depends on your income, your tax filing status, and whether you or your spouse has a retirement plan like a 401(k) at work.

For 2025, the income limits to deduct contributions are increasing:

If you (and your spouse) don't have a retirement plan at work, traditional IRA contributions are fully tax deductible.
Single (you have a workplace retirement plan): If you have a 401(k) or similar at work, you can deduct contributions if you earn under $79,000. Between $79,000–$89,000, the deduction phases out. Over $89,000, you can’t deduct contributions.
Married Filing Jointly (you have a workplace retirement plan): Full deductions if your income is under $126,000. Partial deductions between $126,000–$146,000. No deductions if you earn over $146,000.
Married Filing Jointly (you are contributing and you don’t have a workplace plan but your spouse does): Full deductions if your joint income is under $236,000. Partial deductions between $236,000–$246,000. No deductions over $246,000.

What “Covered by a Retirement Plan” Means:

If you or your spouse has a 401(k) or similar account through work, you’re considered “covered.” This affects how much you can deduct when contributing to a traditional IRA.

What It Means for You:

Double-check your eligibility: If you’re covered by a workplace plan and your income is in the phase-out range, you may still get a partial deduction. This helps reduce your taxes now.
Consider other options: If you can’t deduct IRA contributions, you might explore a Roth IRA or other tax-advantaged accounts.

4. Bitcoin ETFs in Retirement Accounts

Starting in 2025, some 401(k)s and IRAs will allow you to invest in Bitcoin ETFs (exchange-traded funds). This gives you a way to invest in cryptocurrency without the complexity of managing it directly.

What It Means for You:

New diversification options: Bitcoin ETFs let you dip a toe into crypto without diving headfirst into its volatility.
Proceed with caution: Crypto is what I call speculative. I personally limit this to a very small percentage (like 5%) of my portfolio.

Take Action Now

These updates aren’t just financial trivia—they’re opportunities to maximize your retirement savings and grow your wealth. Whether it’s increasing contributions, taking advantage of Roth IRA access, or exploring new investment options, the earlier you act, the more you’ll benefit.

Start planning now so you can make the most of these changes in 2025. Your future self will thank you.

Ready to start taking control of your investments in 2025? Don’t miss my free beginner investing workshop! Learn more here.