Are you worried about having enough money saved for retirement? If so, you’re not alone. Many Americans face a retirement savings shortfall, but there are changes on the horizon that could make it easier for older workers to save more.
Enacted by Congress in 2022, the Secure Act 2.0 introduced several improvements to the retirement system, with key changes set to take effect in 2025. One of the significant updates is the increase in 401(k) catch-up contributions for “max savers,” starting in 2025.
According to Dave Stinnett, Vanguard’s head of strategic retirement consulting, workers aged 60 to 63 will be able to boost their annual 401(k) catch-up contributions to $10,000 in 2025. This change allows them to contribute 150% of the catch-up limit, whichever is greater.
“For many people, this can be a great way to enhance their retirement savings,” said certified financial planner Jamie Bosse from CGN Advisors.
While about 4 in 10 American workers are behind in retirement planning and savings, changes to 401(k) catch-up contributions could provide a much-needed boost for certain savers. In 2023, only 15% of eligible workers made catch-up contributions, mostly higher earners. Despite this, many of them still have concerns about retiring comfortably.
In addition to the increase in 401(k) catch-up contributions, another noteworthy change from Secure Act 2.0 is that Roth catch-up contributions will no longer receive upfront tax breaks for higher earners. Instead, these contributions will only be allowed in after-tax Roth accounts. This applies to individuals who earned more than $145,000 from a single company the prior year.
However, the implementation of this rule has been delayed by the IRS to January 2026, allowing workers to continue making pretax 401(k) catch-up contributions through 2025, regardless of income.
If you’re looking to boost your retirement savings, taking advantage of these changes could be a smart move. Stay informed about new retirement rules and updates to make the most of your financial future. Extreme Investor Network is here to help you navigate these changes and make informed choices for your retirement planning.