The Changes Coming to IRAs and 401Ks in 2025, Ep #176

Curious about the changes coming to IRAs and 401Ks in 2025? In this episode of Retirement Made Easy, we’re breaking down the latest updates to help you plan your retirement strategy. Learn about the new contribution limits for IRAs, Roth IRAs, and 401Ks, including special allowances for those aged 60–63. We’ll also cover updated income limits for Roth IRAs, automatic enrollment in 401Ks, and reduced penalties for missed required minimum distributions (RMDs) on inherited IRAs. Don’t miss this essential guide to staying ahead of the curve and making the most of your retirement savings!

You will want to hear this episode if you are interested in…

  • [2:24] Visit RetirementMadeEasyPodcast.com for FREE resources
  • [3:00] IRA and Roth IRA contributions for 2025
  • [4:32] Contribution limits for 401Ks
  • [7:03] Income limits for Roth IRAs
  • [8:41] Penalties for missed RMDs of inherited IRAs
  • [16:28] More changes to come for 2025

IRA and Roth IRA contributions for 2025

Many clients ask if they can contribute more to their IRA or Roth IRA each year. For 2025, the contribution limit remains $7,000 annually for those under 50, with a $1,000 catch-up contribution for those 50 and older. Simple IRAs have higher limits: individuals aged 60–63 can contribute up to $5,250.

Contribution limits for 401Ks

The 2025 contribution limit for 401Ks increases to $23,500, with an additional $7,500 catch-up for those 50 and older. A new provision allows those aged 60–63 to contribute up to $34,750.

Another key update: automatic enrollment in 401Ks. If you’re not currently participating, you’ll be enrolled automatically at 3–10% of your income, with an annual 1% automatic increase unless adjusted.

Income limits for Roth IRAs

For married couples filing jointly, the Roth IRA income limit increases from $230,000 in 2024 to $236,000 in 2025. If your income exceeds these limits, a backdoor Roth IRA remains an option. Note that Roth 401Ks are not subject to income limits.

Penalties for missed RMDs of inherited IRAs

Starting in 2025, the penalty for missing an RMD from an inherited IRA decreases from 50% to 25%. If you inherited an IRA before January 1, 2020, you must continue annual RMDs based on your age and pay taxes accordingly. 

The government wasn’t a fan of these “stretch” IRAs because they wanted the tax dollars. So, for post-2020 inherited IRAs, the IRS now requires withdrawals to match what the original account owner was taking before their passing, with the account fully depleted within 10 years.

If you inherited a Roth IRA, there is not a required minimum distribution. You can withdraw the money however you want (but the 10-year rule still applies). Personally, I’d let that money grow tax-free as long as possible. 

If you inherit a Roth IRA, there are no RMDs, but the 10-year withdrawal rule still applies. Letting those funds grow tax-free for as long as possible is a smart move!

More changes will be coming for 2025 and you can be sure that I’ll share them on Retirement Made Easy. Subscribe and follow along! 

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