401(k) Catch-Up Contribution Limits to Rise in 2025: Key Updates

If you are saving money in a 401(k) — or similar plan like a 403(b) — this update is for you.

New tax rules have increased the catch-up contribution limits for workers aged 60 to 63, to the tune of an extra $10,000 per year – or 150% of the catch up limit – whichever is greater.

Retirement Savings Crisis Facing Americans

It’s no secret that America is facing a retirement savings crisis.

Academics, thinktanks, and the financial media seem to bombard us with depressing statistics about the current state of retirement planning in the U.S.

PwC recently estimated that the median retirement savings account of $120,000 for those approaching retirement (age 55 to 64) will likely provide less than $1,000 per month over a 15-year retirement span.

The report rightly concludes: “That’s hardly enough, even without factoring in rising life expectancies and increasing healthcare costs.” A recent AARP survey similarly found that 20% of adults ages 50+ have no retirement savings whatsoever!

Much of America’s retirement crisis lies at the feet of big business, who literally hoodwinked U.S. workers with the ol’ switcheroo from defined “benefit” plans (i.e. corporate pensions) to defined “contribution” plans (401k/403b/etc).

In the past, companies rewarded their employees with a funded retirement plan that guaranteed a payout in retirement, often for life. Those days are increasingly gone with companies now reserving lifetime income for its top-earning executives.

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The rest are left to figure out how to save for retirement amid a myriad of technical hurdles, intimidating vernacular, and (too often) limited investment options.

While I prefer the old world pensions (and even “private” pension strategies, such as using a properly structured cash-value life insurance policy to create a retirement income stream), the 401(k), or some variation, is the current reality for most of us seeking to save for retirement.

While it’s not perfect, we’ll take all the good news we can get when it comes to the 401(k).

New 401(k) Catch Up Limits for 2025

Thankfully, new 401(k) catch-up contribution provisions starting in 2025 could offer at least some relief, especially for workers aged 60 to 63.

Under the SECURE Act 2.0, workers nearing retirement age can increase their annual 401(k) catch-up contributions to $10,000 or 150% of the catch-up limit, whichever is greater. This is a healthy boost from the current $7,500 limit for workers aged 50 and above and offers a chance for Americans nearing retirement to accelerate their savings and potentially boost their retirement income.

There’s also another important change ahead: If you earn over $145,000, all catch-up contributions must be made to a Roth account, starting in 2026. (I personally like this new rule because I strongly prefer Roth 401(k)s, in most cases.)

Of course, simply increasing contributions won’t guarantee financial security in retirement.

Your strategy matters.

Three Expert Tips for 401(k) Savers

If you have access to a 401(k) at work, here are my three immediate suggestions.

1. Consider the Roth Option

If you’re like me and prefer to pay tax on the seed instead of on the harvest, then I strongly urge you to consider contributing to a “Roth” 401(k) (instead of a “Traditional”), if your company offers it. The further out you are from retirement, the more you will potentially benefit from the Roth’s tax-free income in retirement.

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2. Take the Match

Contribute only up to the company match. If your company doesn’t offer a match and offers limited investment options, consider opening a Roth IRA to create tax-free income for retirement first.

3. Small business owners consider the Solo 401(k)

If you are a small business owner, you can open your own solo 401(k) and contribute up to $23,000 in 2024 — and you use your own company funds to match your contributions up to a total of $69,000 in 2024! (Just another benefit of business ownership.)

Here’s where expert advice really matters.

If you’re serious about improving your retirement plan and boosting your income, we can help. Reach out to us today, and we’ll connect you with a financial advisor who can work with you to maximize your retirement strategy and ensure you’re on the right path.

We have been connecting individuals just like you with trusted advisors around the country since 2010 through our advisor referral service. To get started, complete this simple form here.

Even if you’re just curious how we can help and want more information, just reach out. We’re here to help.