Retirement Plan Contribution Limits: What High-Income Earners Need to Know in 2025

Each new year brings changes to retirement planning, and 2025 is no exception. For high-income earners, especially those aged 60 to 63, the latest updates to retirement plan contribution limits offer meaningful opportunities to build wealth and optimize tax efficiency. Understanding these changes isn’t just about compliance; it’s about making informed decisions that support your long-term financial goals.

At Grand Wealth Management, we believe in helping you plan better to live better. Here’s what you need to know to stay ahead this year.‍

What's New for 2025?

Increased Catch-Up Contributions for Ages 60–63

One of the most notable changes this year is the enhanced catch-up contribution allowance for individuals between the ages of 60 and 63. Starting in 2025, these individuals can contribute an additional $11,250 to employer-sponsored retirement plans, such as 401(k)s, beyond the standard and traditional catch-up limits.

This expanded benefit, designed to help those nearing retirement accelerate their savings, could mean thousands of extra dollars in tax-advantaged contributions each year. For executives and professionals with high tax rates, this is a powerful planning lever.

Updated Annual Limits

Here’s a quick summary of the 2025 limits:

• 401(k), 403(b), and most 457 plans: The standard contribution limit has increased to $23,500, up from $23,000 in 2024.

• Catch-up contributions for individuals aged 50+: Still holding at $7,500, unless you're in the 60–63 age group, where the limit is now $11,250 under the SECURE 2.0 Act.

• Traditional and Roth IRAs: Contribution limits remain at $7,000, with a catch-up of $1,000 for those 50 and older.

• SEP IRAs and Solo 401(k)s: The limit is now $70,000, including both employee and employer contributions, with catch-up contributions of $77,500 for those over 50 and $81,250 for those ages 60-63.

Strategic Planning Reminders

Staying informed is just the beginning. Here’s how to turn these updates into action:

Time Contributions to Maximize Your Benefit

Typically, it’s wise to front-load IRA contributions earlier in the year to allow more time for compounding growth. On the other hand, front-loading 401(k) contributions may mean giving up employer matching contributions you would have received by spreading your contributions out evenly throughout the year. For those with variable bonuses or who are self-employed, waiting to make IRA contributions until the end of the year when total income is known can also be preferable to determine eligibility for direct Roth IRA contributions or deductible traditional IRA contributions.

Coordinate Across Accounts

If you have multiple income streams or own a business, aligning your savings across different account types can significantly enhance long-term financial outcomes. High earners can benefit from strategies like deferring income through 401(k)s or self-employed retirement plans to reduce current tax liability, while also using backdoor Roth IRAs to build a pool of tax-free retirement assets. Coordinating these with other vehicles, such as 529 plans for education or taxable brokerage accounts for flexible, after-tax investing, can support a range of goals, from funding college to purchasing a second home. Though it can be complex, integrating savings decisions in a thoughtful, tax-aware way is key to maximizing lifetime efficiency.

Take Advantage of Roth Options

Roth contributions can be a wise choice, particularly for those who expect a higher tax rate in retirement. While income limits apply for direct Roth IRA contributions, employer-sponsored plans often allow Roth or after-tax 401(k) contributions regardless of income. High income earners can also make backdoor Roth IRA contributions – which grows the balance in tax free accounts even in peak earning years.

Fund and Invest Health Savings Accounts

While a health savings account is not specifically for retirement, the triple tax advantage – deduction for contributions, tax-free growth, and tax-free distribution – is a powerful tool. Think of this account as the bucket that will take care of your medical expense line in your budget during retirement. The maximum contribution for 2025 is $8,550 for family coverage and a $1,000 catch-up contribution is allowed for those over age 55.

How GWM Helps You Make the Most of It

At Grand Wealth Management, we take a comprehensive, personalized approach to retirement planning through The Grand Wealth Management Process™. This includes:

• Assessing your full financial picture, including taxes, investments, and estate considerations.

• Aligning your retirement contributions with your long-term goals and values.

• Leveraging evidence-based Investment Principles to ensure each decision is grounded in data, not hype.

We work proactively with high-net-worth individuals and families throughout West Michigan, from Grand Rapids to Holland and beyond, to turn financial complexity into clarity.

Plan Ahead with Confidence

Understanding and acting on these contribution limit updates can significantly improve your retirement readiness. Whether you’re within the 60–63 age window or just beginning to think about wealth transfer and tax efficiency, now is the time to revisit your strategy.

Let’s talk about how you can take full advantage of the 2025 changes. Schedule a consultation with a Grand Wealth advisor to explore what’s possible for your future.

Looking for more insight? Learn more about tax-efficient strategies here.

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_{Disclosure:
The opinions expressed herein are those of Grand Wealth Management (“GWM”) and are subject to change without notice. This material is not financial advice or an offer to sell any product. This article is for informational purposes only and does not constitute investment, legal or tax advice and should not be used as a substitute for the advice of a professional legal or tax advisor. GWM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This is not a recommendation to buy or sell a particular security. Past performance does not indicate future results. GWM is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about GWM including our investment strategies, fees and objectives can be found in our Form ADV Part 2 and Form CRS, which are available upon request.}