The Internal Revenue Service (IRS) has introduced updates to how workers can save for retirement, following the passing of the SECURE 2.0 Act in 2022. One of the most interesting updates applies to workers between the ages of 60 and 63, who will now be able to increase their contributions significantly. Traditionally, those 50 and over have been able to make additional “catch up” contributions to their retirement savings—$7,500 as of 2024 and 2025.
Now, there is an additional “super” catch-up contribution of up to $11,250 available for those aged 60 to 63. With this new measure, workers in this age bracket can save up to $34,750 in 2025, combining the normal and super catch-up contributions. The expanded catch-up contribution limits aim to support older Americans nearing retirement by allowing them to save more as they prepare to leave the workforce.
For those who couldn’t prioritize savings earlier due to low earnings or financial demands like raising children, this presents a valuable chance to bolster their retirement funds. However, this enhanced saving option is temporary. Upon reaching the age of 64, the limit reverts to the standard contribution cap, which is set at $31,000 in 2025.
Will this be a helpful solution for most?
Irs retirement updates promote savings
Regrettably, potentially not.
Given that this can be a higher amount of money to set aside, only those who can afford to do so will likely benefit. Typically, those able to utilize the maximum contribution arrive already doing so. The problem lies with those who cannot contribute the original amount, let alone an extra contribution.
According to the Economic Policy Institute (EPI), 57.2% of employees nearing retirement contribute to their employer-sponsored retirement plans, leaving more than 40% of this workforce segment without any contribution at all. The EPI has also revealed that over one-third of workers aged 55 to 64 lacked access to an employer-sponsored retirement plan as of 2019. Between mortgage payments, transportation costs, and daily expenses, many workers who do contribute to retirement accounts cannot afford to increase their contributions.
Although the new rule may not resolve all challenges, it is still important for those who can contribute the maximum possible amounts, including these super catch-up contributions, to do so. This financial independence can reduce reliance on Social Security during retirement. For those unable to contribute significantly to retirement accounts, investing some money to aid growth and reducing expenses can help to still put away some savings for retirement.
