The end of the year is a new opportunity to increase your retirement savings. As part of your 2024 year-end planning, it’s important to look at the IRS’s new 2025 IRA contribution rules.

Every year the IRS sets new limits on how much you can contribute to traditional IRAs and Roth IRAs. This contribution limit increases each year based on inflation (what the IRS calls cost-of-living adjustments, or COLA).

At the time of this writing, the IRS has not yet announced new IRA contribution limits for 2025. But regardless of the new IRA limits for 2025, here are a few basic strategies everyone should consider as they prepare to save and invest. Retirement in 2025 and beyond.

Use a Roth IRA if you qualify

Using a Roth IRA is one of the best ways to save for retirement because it allows your money to grow tax-free and provides you with tax-free distributions in retirement. Unlike a traditional IRA or 401(k), the money you put into a Roth IRA does not give you a tax deduction. But instead, this money grows tax-free and can provide you with: tax-free income in retirement.

For 2024, individuals who qualify for a Roth IRA can deposit up to $7,000 into this special retirement account. And people 50 and older can contribute an extra $1,000 as a catch-up contribution.

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But not everyone qualifies for a Roth IRA. There are some restrictions depending on your income and tax filing status. For example, for 2024, these individuals can contribute fully to a Roth IRA:

• Single applicants with modified adjusted gross income Less than $146,000
• Marriage application with modified adjusted gross income less than $230,000

Others with higher incomes or different filing statuses may make partial or no contributions to a Roth IRA. It’s possible that these limits will be slightly higher for 2025, but we won’t know until the IRS announces new IRA contribution rules for 2025.

Maximize your combined IRA contribution limit

If you prefer to get an up-front tax deduction on your IRA contributions, you don’t need to use a Roth IRA. You can choose a traditional IRA and get a tax deduction of up to $7,000 (for 2024) if you qualify, or up to $8,000 with a catch-up contribution for people age 50 and over.

There are several restrictions on who can take a tax deduction from a traditional IRA, depending on income and tax filing status. As of 2024, these individuals can deduct the full amount of their traditional IRA contributions:

• Single filers
• Filing married with a spouse who is not covered by a workplace pension plan
• Filing jointly with a spouse covered by a workplace retirement plan with a modified adjusted gross income of less than $230,000

Others with different filing statuses or higher incomes may be allowed to deduct only some of the money they put into a traditional IRA, or no deductions at all. This makes it important to be strategic about your IRA contributions.

Keep in mind: If you qualify for both types of IRA accounts, you can deposit up to a total of $7,000 (or $8,000 if you’re 50 or older) into the traditional IRA and Roth IRA accounts combined for 2024. Depending on your income and tax goals, you may want to split this money—put half in a tax-deductible traditional IRA and half in a Roth IRA for tax-free income in retirement.

50 and over? Make IRA catch-up contributions

If you’re 50 or older, your retirement age is approaching, making your retirement age even more important Increase your retirement savings. The IRS gives an additional bonus to the 50+ group by allowing you to contribute an additional $1,000 (for 2024) to your IRAs (traditional, Roth, or a combination of both).

We don’t yet know what the 2025 IRA catch-up contribution limit will be. However, this limit will now be indexed to inflation. And based on recent high inflation, it’s possible the 2025 IRA capture limit will be slightly higher than the usual $1,000.

Every extra dollar of retirement investments counts. If the IRS allows you to save an extra $1,000 (or more) in tax-advantaged retirement accounts, you should take the deal.

In conclusion

New IRS rules regarding 2025 IRA contribution limits may be announced at any time. Under the 2024 rules, it’s possible that many retirement savers will be allowed to put up to $7,000 (or more) into traditional IRAs, Roth IRAs, or both. People aged 50 and over need to maximize their catch-up contribution in 2025; this may be higher than in previous years.