Saving for retirement? Here are the IRA contribution limits for 2025.

To maintain a comfortable lifestyle in retirement, you typically need to have savings or access to income outside of Social Security.

The typical retiree today receives a Social Security benefit of only about $1,922 a month, which equates to an annual income of about $23,000. This may be enough to just get by, but forget about money for additional expenses such as hobbies, travel and entertainment.

Now, when it comes to saving for retirement, you have a choice. You may participate in a retirement plan sponsored by your employer. But if such a plan is not available to you, an individual retirement account (IRA) may be your next best choice.

The IRS just announced IRA contribution limits for 2025. So if you’re looking to max out your IRA, this is something you’ll want to consider.

IRA limits will not change in 2025

Currently, the maximum IRA contributions are $7,000 for workers under age 50 and $8,000 for workers age 50 and older. In 2025, these limits will remain the same.

This may seem surprising to you if you know that the SECURE 2.0 Act of 2022 allows for annual cost-of-living adjustments for catch-up IRA contributions. But remember: just because this catch-up limit Maybe increase does not mean that it is will increase every year. Thus, in 2025 it will remain at a stable level of $1,000.

There are benefits to funding an IRA for retirement.

One of the disadvantages of IRAs is that they have much lower contribution limits than a 401(k). Next year, the maximum 401(k) amount will be $23,500 for savers under age 50 and $31,000 for those age 50 and older. In addition, many employers offer 401(k) matching to help employees increase their savings.

But that doesn’t mean you won’t enjoy your share of the benefits in the IRA. First, if you fund a traditional IRA, your contributions can shield part of your income from taxes. Additionally, IRAs offer some key advantages over 401(k)s.

First, you can open an IRA at any financial institution that offers one. This gives you the opportunity to shop around for a retirement plan that’s right for you. With a 401(k), you are limited to the plan your employer offers.

Second, IRAs allow you to manually select stocks for your investment portfolio, whereas 401(k) plans typically limit you to fund selection. This freedom of choice is beneficial for several reasons.

Not only do you get complete control over the assets in which you invest your money, but some 401(k) funds charge exorbitant fees (known as expense ratios) that can seriously eat into returns. With an IRA, you can take steps to avoid hefty investment fees and build a portfolio that has the potential to generate returns that outperform the returns of the stock market as a whole.

You may be disappointed to hear that IRA limits will not increase in 2025. But you can still add a lot of value to your pension by maxing out in the new year.

And remember: You don’t have to limit your retirement savings to $7,000 or $8,000 in 2025. Once you reach your IRA maximum, you can look at other accounts for retirement savings purposes, such as health savings accounts (HSAs) or even taxable brokerage services. check.