(CNN) – Next year, Americans will be allowed to save a little more in their 401(k) tax-deferred than this year, unless they’re age 60, in which case for the first time you will be allowed to save much more.

The new contribution limit for 401(k)s and other workplace retirement plans in 2025 will be $23,500, up from $23,000 now, the Internal Revenue Service said Friday.

The IRS has not, however, increased the catch-up contribution limit — that’s the extra amount of money people 50 and older can contribute each year to tax-advantaged plans like 401(k), 403 (b)s, 457 and the federal government’s thrift savings plan. The catch-up contribution limit will remain the same at $7,500.

Taken together, though, that means anyone in their 50s can save up to $31,000 next year for retirement, and those savings won’t be subject to income tax in 2025.

But if you turn 60, 61, 62 or 63, thanks to a provision in the Secure 2.0 retirement law, the catch-up contribution limit will be even higher for the first time next year. The IRS said it would be set at $11,250, or 150 percent of the general recovery provision. That means people at those ages can save up to $34,750.

Now for an ounce of reality: Most people don’t max out their 401(k) savings, regardless of their applicable contribution limit.

Vanguard, in its 2024 How America Saves report, found that only 14 percent maxed out their 401(K) savings in 2023. “Participants who contributed the maximum dollar amount tended to have higher incomes, were older, they had longer tenures with their current employer. , and accumulated substantially larger account balances,” according to the report.

However, it remains the case that unless and until The US Retirement Savings System is reformed to do a better job of providing workers with adequate retirement income beyond what Social Security will provide, most private sector workers – who have no pensions – will be dependent on the savings they get in their retirement plans savings at work and elsewhere. .

Higher income thresholds for IRAs

The IRS has not increased contribution limits for individual retirement accounts, known as IRAs. The annual limit next year will remain at $7,000, and the catch-up contribution amount for those over $50 will still be $1,000.

But it has increased the modified adjusted gross income thresholds that determine whether you are eligible to contribute to an IRA on a tax-advantaged basis.

Starting with Roth IRAs — where your contributions are subject to income tax in the year you make them, but usually never again — if you’re single, you can only contribute to a Roth next year if your AGI is no more than $165,000 , more than $161,000. If you are married filing jointly, your AGI must not exceed $246,000 — up from $240,000 this year.

With a traditional IRA — where your contributions can be deductible in the year you make them and then grow tax-deferred until you withdraw them in retirement — if you’re single and covered by a workplace retirement plan, modified AGI doesn’t must exceed $89,000 , up from $87,000 this year. If you’re married filing jointly and personally covered by a workplace retirement plan, your modified joint AGI must not exceed $146,000, up from $143,000. The the limits are somewhat different if your spouse is the one with the workplace plan, but you’re saving in an IRA.

Changes to the Saver Credit

Low- and moderate-income workers who save something — anything — for retirement may be eligible to claim the Saver’s Credit, which is a dollar-for-dollar reduction in their taxes.

To be eligible next year, the IRS raised the income threshold to $39,500 for singles, up from $38,350 this year; to $59,250 for heads of household, up from $57,375; and to $79,000, up from $76,500, for married couples filing jointly.

Here is a useful one explicitly about how Fidelity credit works.