Workers aged 60 to 63 will soon be able to boost their retirement savings, thanks to a key change coming to 401(k) catch-up contributions in 2025. Enacted in 2022, the Secure Act 2.0 introduced several improvements to the retirement system, including higher catch-up contribution limits for older workers. Starting in 2025, employees in the 60-63 age range can increase their annual 401(k) catch-up contributions to $10,000 or 150% of the regular catch-up limit, whichever is greater.
This change aims to help older workers set aside more money as they near the end of their careers. Dave Stinnett, head of strategic retirement consulting at Vanguard, confirmed that while some Secure 2.0 changes have already taken effect, this key change for “max savers” will begin in 2025. The higher catch-up limit comes at a time when many American workers are struggling with their retirement savings.
A recent survey in August found that about 4 in 10 workers are behind in their retirement planning and savings. Currently, employees can defer up to $22,500 for 2024, with an additional $7,500 for workers aged 50 and older. The increased limit for the 60-63 age group could provide substantial relief for certain savers, according to experts.
Boosting retirement savings in 2025
Jamie Bosse, a certified financial planner and senior advisor at CGN Advisors in Manhattan, Kansas, expressed his support for the change, stating, “This can be a great way for people to boost their retirement savings. And depending on your contributions, the boost can be quite significant.”
However, not all eligible workers are taking advantage of catch-up contributions.
Vanguard’s 2024 How America Saves report revealed that only about 15% of eligible workers made catch-up contributions in 2023, and those who did were typically high earners. The report also showed that more than half of 401(k) participants with income above $150,000 and nearly 40% with an account balance of more than $250,000 made catch-up contributions in 2023. Another aspect of the Secure Act 2.0 that will impact catch-up contributions is the change to Roth accounts.
Starting in 2026, workers earning more than $145,000 from a single company in the previous year will have to make their catch-up contributions to after-tax (Roth) accounts, including 401(k), 403(b), or 457(b) plans. The IRS has delayed the implementation of this rule to January 2026, allowing workers to continue making pretax 401(k) catch-up contributions through 2025, regardless of their income. As the retirement landscape continues to evolve, it is essential for workers to stay informed about the changes and how they can impact their savings strategies.
Consulting with a financial advisor can help individuals understand how to best leverage these updates to maximize their retirement savings.
