Know exactly how much you can shelter from taxes each year. This lesson covers the 2025 IRS limits for every major retirement account, the rules that trip people up, and the right order to put your money to work.
2025 Contribution Limits at a Glance
| Account |
Under 50 |
Age 50–59 / 64+ |
Age 60–63 |
| 401(k) / 403(b) |
$23,500 |
$31,000 |
$34,750 |
| Roth IRA |
$7,000 |
$8,000 |
$8,000 |
| Traditional IRA |
$7,000 |
$8,000 |
$8,000 |
| Max possible total* |
$30,500 |
$39,000 |
$42,750 |
* 401(k) + one IRA (Roth or Traditional — the $7,000/$8,000 limit is shared between them).
Rules You Need to Know
- IRA limit is combined, not per account. You can have both a Roth IRA and a Traditional IRA, but your total contributions across both cannot exceed $7,000 ($8,000 if 50+) per year.
- IRA deadline is Tax Day. You have until April 15 of the following year to make IRA contributions for the current tax year. 401(k) contributions must be made within the calendar year.
- Employer match doesn't count toward your limit. Your $23,500 401(k) limit is just your contributions. Employer matching is on top of that — the total combined limit (your money + employer money) is $70,000 in 2025.
- Excess contributions are penalized. Contributing more than the IRS limit triggers a 6% excise tax on the excess amount for every year it stays in the account. Fix it before the tax deadline.
The Right Order to Contribute
Not sure where to put your money first? Follow this priority order to get the most out of every dollar you save.
-
401(k) up to employer match. Always contribute at least enough to get the full employer match. This is an instant 50%–100% return — nothing beats it.
Example: If your employer matches 100% up to 4% of salary, contribute at least 4%.
-
Max out your Roth IRA ($7,000). After capturing the match, fill your Roth IRA next. Tax-free growth is extremely valuable, especially for younger savers.
Example: Contribute $583/month to hit the $7,000 annual limit.
-
Max out your 401(k) ($23,500). Once the Roth IRA is maxed, go back and increase your 401(k) contributions toward the full $23,500 limit.
Example: That's ~$1,958/month beyond what you're already contributing for the match.
-
Taxable brokerage account. Still have money to invest? Open a taxable brokerage account. No contribution limits, but no special tax advantages either.
Example: Good for goals before retirement age or if you've maxed all tax-advantaged options.
Key Insight: Set up automatic monthly contributions to your IRA as soon as January 1. Spreading $7,000 across 12 months is just $583/month — much more manageable than scrambling to deposit a lump sum before the April deadline.
Key Terms
- Contribution Limit — The maximum amount the IRS allows you to put into a retirement account in a given tax year. Exceeding this limit results in a 6% excise tax penalty.
- Catch-Up Contribution — An additional amount savers age 50 and older (or 60–63 for 401(k)s) can contribute beyond the standard annual limit.
- Combined IRA Limit — The $7,000 annual limit applies across ALL your IRAs combined — Roth and Traditional together, not each separately.
- Elective Deferral — The portion of your 401(k) contribution that comes from your own paycheck. This is separate from any employer match.
Quick Summary
- 401(k) limit: $23,500 (up to $34,750 if age 60–63)
- IRA limit: $7,000 ($8,000 if 50+) — shared across Roth + Traditional
- Employer match is on top of your personal 401(k) limit
- IRA contributions can be made until Tax Day (April 15)
- Excess contributions face a 6% annual penalty — fix them quickly
- Priority: match first → Roth IRA → max 401(k) → brokerage
