Government employees with 457 plans have a contribution limit of $22,500 in 2023, which is set to increase to $23,500 in 2024 and $24,500 in 2025. The catch-up contribution limit for those age 50 and older is $7,500 in 2023, which will increase to $8,000 in 2024 and $8,500 in 2025.
457 plans are offered by state and local governments and tax-exempt organizations. They allow employees to save for retirement on a tax-advantaged basis. Contributions to a 457 plan are made on a pre-tax basis, which reduces the employee’s taxable income. Earnings on the investments within the plan grow tax-deferred, and withdrawals in retirement are taxed as ordinary income.
457 plans have some advantages over other retirement savings plans, such as 401(k) plans. For example, 457 plans have no income limits, so anyone can contribute to a 457 plan, regardless of their income. Additionally, 457 plans allow participants to make catch-up contributions, which can help them save more for retirement.
1. Employee limit
The employee limit for 457 plans in 2025 is $24,500. This limit is set by the Internal Revenue Service (IRS) and is adjusted annually for inflation. The employee limit is the maximum amount that an employee can contribute to their 457 plan each year. This limit applies to both traditional 457 plans and Roth 457 plans.
It is important to understand the employee limit for 457 plans because it can help you to maximize your retirement savings. If you contribute more than the employee limit, you may be subject to a 6% excise tax on the excess contributions. Additionally, if you are age 50 or older, you can make catch-up contributions of up to $8,500 in 2025. These catch-up contributions can help you to save more for retirement and make up for any lost savings from previous years.
457 plans offer several advantages over other retirement savings plans, such as 401(k) plans. For example, 457 plans have no income limits, so anyone can contribute to a 457 plan, regardless of their income. Additionally, 457 plans allow participants to make catch-up contributions, which can help them save more for retirement. By understanding the employee limit for 457 plans, you can make the most of your 457 plan and save more for retirement.
2. Catch-up contribution limit
The catch-up contribution limit for 457 plans is set at $8,500 for 2025. This limit is available to participants who are age 50 or older by the end of the calendar year. The catch-up contribution limit is a valuable tool for participants who want to save more for retirement and make up for any lost savings from previous years.
The catch-up contribution limit is a significant component of the overall 457 contribution limits for 2025. For participants who are age 50 or older, the catch-up contribution limit can allow them to contribute up to $33,000 to their 457 plan in 2025. This can make a big difference in the amount of money that a participant can save for retirement.
For example, consider a participant who is age 55 and has been contributing $18,000 to their 457 plan for the past 10 years. If this participant takes advantage of the catch-up contribution limit, they can contribute an additional $8,500 to their plan in 2025. This will increase their total contribution for the year to $26,500. Over time, this extra savings can make a significant difference in the participant’s retirement nest egg.
It is important to note that catch-up contributions are not mandatory. Participants can choose to contribute less than the catch-up contribution limit, or they can choose not to make any catch-up contributions at all. However, for participants who are age 50 or older and want to save more for retirement, the catch-up contribution limit is a valuable tool that can help them reach their financial goals.
FAQs on 457 Contribution Limits 2025
Here are some frequently asked questions about the 457 contribution limits for 2025:
Question 1: What is the employee limit for 457 plans in 2025?
Answer: The employee limit for 457 plans in 2025 is $24,500.
Question 2: What is the catch-up contribution limit for 457 plans in 2025?
Answer: The catch-up contribution limit for 457 plans in 2025 is $8,500.
Question 3: Who is eligible to make catch-up contributions to a 457 plan?
Answer: Participants who are age 50 or older by the end of the calendar year are eligible to make catch-up contributions to a 457 plan.
Question 4: Are catch-up contributions mandatory?
Answer: No, catch-up contributions are not mandatory. Participants can choose to contribute less than the catch-up contribution limit, or they can choose not to make any catch-up contributions at all.
Question 5: What are the benefits of making catch-up contributions to a 457 plan?
Answer: Catch-up contributions can help participants save more for retirement and make up for any lost savings from previous years.
Question 6: How do I make catch-up contributions to a 457 plan?
Answer: Catch-up contributions are made in addition to regular contributions to a 457 plan. Participants can make catch-up contributions by increasing their regular contributions or by making a one-time catch-up contribution.
Summary: The 457 contribution limits for 2025 are $24,500 for the employee limit and $8,500 for the catch-up contribution limit. Catch-up contributions are available to participants who are age 50 or older and can help them save more for retirement. By understanding the 457 contribution limits, participants can make the most of their 457 plan and save more for retirement.
Next Article Section: 457 Plan Investment Options
457 Contribution Limits Tips
457 plans are a great way to save for retirement, and the contribution limits for 2025 are generous. Here are a few tips to help you make the most of your 457 plan:
Tip 1: Contribute as much as you can. The employee limit for 457 plans in 2025 is $24,500, and the catch-up contribution limit is $8,500. If you are able to contribute the maximum amount, you will be well on your way to a secure retirement.
Tip 2: Take advantage of catch-up contributions. If you are age 50 or older, you can make catch-up contributions to your 457 plan. Catch-up contributions can help you save more for retirement and make up for any lost savings from previous years.
Tip 3: Consider a Roth 457 plan. Roth 457 plans are a great way to save for retirement on a tax-free basis. With a Roth 457 plan, you will not pay any taxes on your withdrawals in retirement.
Tip 4: Invest your 457 plan wisely. The investment options available in your 457 plan can have a big impact on your retirement savings. Be sure to choose investments that are appropriate for your risk tolerance and investment goals.
Tip 5: Get professional advice. If you are not sure how to make the most of your 457 plan, consider getting professional advice from a financial advisor.
By following these tips, you can make the most of your 457 plan and save more for retirement.
Conclusion: 457 plans are a great way to save for retirement. By understanding the contribution limits and following the tips outlined above, you can make the most of your 457 plan and save more for retirement.
457 Contribution Limits 2025
The 457 contribution limits for 2025 offer a valuable opportunity for government and tax-exempt organization employees to save for a secure financial future. By understanding these limits and planning accordingly, individuals can maximize their retirement savings and achieve their financial goals. It is important to remember that the contribution limits are subject to annual adjustments, so it is advisable to stay informed about any changes to ensure optimal retirement planning.
The 457 plan offers several advantages, including no income limits, catch-up contribution provisions, and the potential for tax-free withdrawals in retirement. By taking advantage of these benefits and adhering to the contribution limits, individuals can accumulate substantial retirement savings and enjoy a comfortable and financially secure retirement.
