401(k) contribution limit projections for 2025: Mercer, Milliman
While the official IRS announcement will come next month, the contribution limit for retirement accounts will likely increase from $23,000 to $23,500 in 2025, according to new Mercer and Milliman reports.
The official IRS announcement will come in late October or early November, but it’s likely participants will see a modest $500 increase to the amount they can contribute to their 401(k)s in 2025, according to new reports from Mercer and Milliman.
The new prediction from Mercer has found that contribution limits for retirement accounts will likely get only a modest increase for 2025, but final numbers could depend on the September inflation data.
Using the Internal Revenue Code’s cost of living adjustment and rounding methods, the Consumer Price Index through August and estimated CPI for All Urban Consumers for September, benefits consultant Mercer has projected that the contribution limits for 401(k), 4013(b) and eligible 457 plan elective deferrals will increase from $23,000 to either $23,500 or $24,000 in 2025.
Based on the latest inflation figures, actuarial consultant Milliman decreased its original prediction in April of $24,000 to $23,500.
The catch-up contribution limits (for retirement plans other than SIMPLE plans) is too close to call, according to Mercer and Milliman, but both provided estimates.
For employees (ages 60-63), the catch-up contribution limits could rise from $7,500 in 2024 to these limits:
- Mercer: $11,250 or $12,000
- Milliman: $12,000
For all other employees, the catch-up contribution limits could rise from $7,500 in 2024 to these limits:
- Mercer: $7,500 or $8,000
- Milliman: $8,000
The limit could stay the same at $7,500 or rise to $8,000 due to a “moderate but not unusual amount of inflation in September,” according to Mercer.
For employees aged 60-63, the limits are based on the new, higher catch-up contribution limits, as implemented by the SECURE 2.0 regulation, set to take effect for the 2025 tax year. However, this change assumes the necessary SECURE 2.0 corrections pass Congress or the IRS issues guidance that the age 60-63 limit is based on the 2025 limit for other participants. For all other employees, the limit could stay the same at $7,500 or rise to $8,000, according to Mercer.
Related: IRS announces HSA, HDHP limits for 2025
Last year, the IRS announced the retirement contribution limits on Nov. 1, 2023.