To maintain a comfortable lifestyle in retirement, you generally need to come in with savings or have access to income outside of Social Security.

The typical retired worker today collects a Social Security benefit of only about $1,922 per month, which translates to an annual income of about $23,000. This may be enough to get by, but forget money for extras like hobbies, travel and entertainment.

Now, when it comes to building retirement savings, you have options. You could attend a retirement plan sponsored by your employer. But if such a plan is not available to you, a individual retirement account (IRA) may be your next best bet.

Image source: Getty Images.

The IRS just announced the IRA contribution limits for 2025. So if you’re someone aiming to max out your IRA, you’ll want to pay attention.

IRA limits don’t change in 2025

Currently, IRA contributions are capped at $7,000 for workers under 50 and $8,000 for those 50 and older. In 2025, these limits remain the same.

You might find it surprising to know that SECURE 2.0 Act of 2022 allowed an annual cost-of-living adjustment to IRA catch-up contributions. But remember: only because the recovery limit maybe growth does not mean that will grows every year. As such, it remains constant at $1,000 for 2025.

There are benefits to funding an IRA for retirement

One disadvantage of IRAs is that they have much lower contribution limits than 401(k)s. Next year, 401(k)s will max out at $23,500 for savers under 50 and $31,000 for those 50 and older. In addition, many employers offer 401(k) matches that help workers grow their savings.

But that doesn’t mean you won’t enjoy your share of the benefits in an IRA. First, if you fund a traditional IRA, your contributions can shield some of your income from taxes. IRAs also offer some key benefits over 401(k)s.

First, you can open an IRA at any financial institution that offers one. This gives you the opportunity to search for a retirement plan that works for you. With a 401(k), you are limited to the plan provided by your employer.

Second, IRAs allow you to handpick stocks for your investment portfolio, while 401(k) plans typically limit you to a selection of funds. This freedom of choice is advantageous for several reasons.

Not only do you get complete control over the assets you put your money into, but some 401(k) funds charge exorbitant fees (known as expense ratios) that can seriously erode returns. With an IRA, you can take steps to avoid high investment fees and build a portfolio that has the potential to provide returns that exceed those of the stock market as a whole.

It may be disappointing to hear that IRA limits aren’t increasing in 2025. But you can still do your retirement a world of good by maxing out in the new year.

And remember: You don’t have to limit your retirement savings to $7,000 or $8,000 in 2025. Once you’ve maxed out your IRA, you can look at other retirement savings accounts, such as health savings accounts (HSA) or even a taxable brokerage account.