(CNN) — Come next year, Americans will be allowed to save a little more in their 401(k) on a tax-deferred basis than they can this year, unless they’re in their early 60s, in which case for the first time you’ll be allowed to save a lot more.

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

The IRS did not, however, increase the limit on catch-up contributions — that’s the extra amount of money people 50 and older can contribute annually in tax-advantaged plans like 401(k)s, 403(b)s, 457 plans 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 next year can save up to $31,000 for their retirement nest egg, and those savings will not be subject to income tax in 2025.

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

Now for an ounce of reality: Most people do not max out their 401(k) savings, whatever their applicable contribution limit.

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

Nevertheless, it remains the case that unless and until the US retirement savings system is reformed to do a better job at providing workers with adequate income in retirement beyond just what Social Security will provide, the majority of private sector workers — who do not have pensions — will be dependent on the savings they accrue in workplace savings plans and elsewhere.

Higher income thresholds for IRAs

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

But it did increase the modified adjusted gross income thresholds that determine whether you’re eligible to contribute to an IRA on a tax-advantaged basis.

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

With a traditional IRA — in which your contributions may be deductible 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, your modified AGI must not exceed $89,000, up from $87,000 this year. If you’re married and filing jointly and you personally are covered by a workplace retirement plan, your joint modified AGI must not exceed $146,000, up from $143,000. The limits are somewhat different if your spouse is the one with the workplace plan but you’re saving in an IRA.

Changes made to the Saver’s Credit

Low- and moderate-income workers who are saving something — anything — for retirement may be eligible to claim the Saver’s Credit, which is a dollar-for-dollar reduction of their tax bill.

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 households, up from $57,375; and to $79,000, up from $76,500, for married couples filing jointly.

Here’s a helpful explainer of how the credit works from Fidelity.