New 401(K) Rules Let Workers 60-63 Maximise Retirement Savings Starting in 2025

Starting in 2025, workers aged 60-63 will see a significant boost to their retirement savings potential under new 401(k) rules. With changes to catch-up contributions and combined limits, they’ll be able to contribute thousands more towards their retirement. These updates, part of the SECURE 2.0 Act, offer a valuable opportunity to enhance financial security.

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US 401(k) retirement savings change
US 401(k) retirement savings change. credit : shutterstock | en.Econostrum.info - United States

The 401(k) retirement savings plan is set to undergo major changes in 2025, particularly benefiting employees aged 60 to 63. These updates, which are part of the SECURE 2.0 Act, offer an opportunity for older workers to significantly enhance their retirement savings as they approach retirement age.

The U.S. government’s decision to increase contribution limits for workers in this age group is aimed at addressing the growing concern that many individuals may not have saved enough for retirement. 

According to the IRS, starting in 2025, employees within this age range will have the opportunity to contribute substantially more towards their 401(k) plans, ultimately helping them build a more secure financial future.

Enhanced Contribution Limits for Workers Aged 60-63

Starting in 2025, workers aged 60 to 63 will be able to make catch-up contributions of up to $11,250, known as the “super catch-up.” 

This adjustment increases the maximum contribution that these individuals can make to their 401(k) plan, bringing the total employee deferral limit to $34,750. This change provides workers in this age bracket with a significantly higher contribution limit, compared to the standard catch-up contribution of $7,500 available for those aged 50 and older.

In addition, the combined contribution limit for both employees and employers will increase to $70,000. This change is designed to allow workers to make up for years when they may not have been able to contribute as much to their retirement savings, or simply for those who wish to increase their contributions as they approach retirement.

Key Considerations for Roth Contributions and Multiple Plans

The new rules also include important details about Roth contributions and the handling of multiple 401(k) plans. If a worker’s income exceeds $145,000 in the previous year, they may need to make their catch-up contributions on a Roth basis, meaning they will pay taxes upfront. 

However, this rule will not be in effect until 2026, providing time for workers to plan ahead. Additionally, employees who have access to multiple 401(k) plans from different employers will still be subject to the overall contribution limits for the year. 

According to the IRS, workers are advised to carefully track their contributions across all plans to ensure they do not exceed the annual contribution limits. This is essential for avoiding penalties and ensuring compliance with tax regulations.

The introduction of these new contribution limits under the SECURE 2.0 Act represents a significant change in how retirement savings are structured for older workers. These adjustments are part of broader efforts to help Americans secure their financial future and close the gap in retirement savings as they approach the end of their working careers.

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