7 IRS Changes That Will Impact Your Retirement Accounts in 2025

The U.S. tax code can be confusing, especially when considering the steady stream of changes that seem to appear each year. 

The following recent changes could have an impact on your efforts to build a larger nest egg that will see you through your retirement years.

Here are a few important changes to keep in mind as you save for retirement this year so that you don't end up surprised.

For the 2024 tax year, the maximum amount individuals could contribute to a 401(k) or Individual Retirement Account was $23,000.

This year — effective January 1, 2025 — retirement savers can put up to $23,000 in pre-tax dollars into their IRA.

While 401(k)s are among the most common types of savings plans, they aren't the only retirement savings options available.

You may have also been stashing money away in a 403(b), 457, or federal Thrift Savings Plan. If so, the same limit increase applies: You may contribute an extra $500 to your savings account this year compared to 2024.

Unlike money saved in traditional IRAs, cash set aside for a Roth IRA is taxed preemptively rather than when you cash it out in retirement.

Contribution limits are different for Roth IRAs than traditional accounts, and the max contribution amount for Roths went up last year by 7.6% to a total of $7,000.

Small-business owners can't always afford to offer their employees 401(k) plans with employer matches. The IRA's new starter 401(k) plan functions like a typical 401(k), but it doesn't require employer matches.

Its limits are also lower: Employees may contribute up to $6,000 a year plus an extra $1,000 once they're over age 50.

Before this year, employees who were working on paying off their student loans needed to contribute to a 401(k) to qualify for any sort of employer match.

Thanks to new legislation, SECURE 2.0, as long as employees are paying off debt related to "qualified student loan payments" (tuition, fees, books, and expenses), they may receive matching retirement contributions counted as "elective deferrals."

The same rules that apply to a company's 401(k) employer match now apply to student loan payments, giving student loan payers the chance to start saving money.

Until this year, with very few exceptions, anyone withdrawing money from a 401(k) account before age 59.5 would have to pay a 10% penalty (on top of paying the taxes associated with the account).

However, with the 2024 changes, individuals are allowed to withdraw up to $1,000 a year if they or their families have experienced a financial emergency within the last year.

Based on the new rules, you don't have to pay the 10% penalty as long as you pay the money back to the account within three years.

If an individual self-certifies that they were a victim of domestic abuse, they may make a withdrawal without paying the 10% penalty.

The total amount that may be withdrawn is either up to $10,000 or 50% of the total amount of money in the account — whichever sum is smaller.

IRS rules constantly change, and you need to stay on top of these shifting winds to avoid money stress when you retire. If you are unsure about how rules may be different in 2025, check in with your accountant.

Staying on top of these changes can help ensure you do not run afoul of IRS rules, you contribute the maximum to your nest egg, and you're able to supplement your social security.