Saving for retirement is critical, and for some workers, it’s about to become even easier. Thanks to the SECURE 2.0 Act, employees turning 60 to 63 in 2025 will benefit from new rules increasing their 401(k) contribution limits. This change could mean significant tax savings and enhanced retirement security for those eligible.
What Is Changing with 401(K) Contributions in 2025?
Starting January 1, 2025, the SECURE 2.0 Act will increase the catch-up contribution limits for certain workplace retirement plans, including 401(k), 403(b), and 457(b). Traditionally, catch-up contributions allow individuals aged 50 and older to contribute more to their retirement accounts than the standard limit.
In 2025, the standard catch-up contribution limit will be $7,500, enabling eligible employees to contribute up to $31,000 to their 401(k). However, for workers aged 60 to 63, a new super catch-up contribution allows an even larger addition: $10,000 or 150% of the standard catch-up contribution, whichever is higher. This brings the total potential contribution for these select workers to $33,750.
Who Qualifies for the Super Catch-up Contribution?
The eligibility for the enhanced catch-up contribution is narrow. Only individuals who are between 60 and 63 years old by the end of 2025 can take advantage of this increased limit. Those outside this age range, including those turning 64 in 2025, won’t qualify.
This four-year window (from ages 60 to 63) presents a unique opportunity for workers to maximize their retirement contributions during what are often their highest-earning years.
Maximizing the Benefits of Higher Catch-up Contributions
While 401(k) plans come with drawbacks, such as high fees and limited investment options, the opportunity to defer taxes at a higher marginal tax rate can outweigh these disadvantages, especially during peak earning years.
Why 2025 Is a Unique Year for Catch-up Contributions
2025 marks the introduction of this super catch-up contribution. By deferring taxes on a larger portion of their income, eligible participants can significantly reduce their taxable income in one of their highest-earning years, preparing themselves better for retirement.
However, this opportunity is temporary. Starting in 2026, those earning above a certain threshold ($145,000 in 2023, adjusted for inflation) will need to allocate their catch-up contributions to a Roth 401(k). While Roth accounts offer tax-free growth, they lack the upfront tax deferral that higher earners often seek.
Considerations for Roth vs. Traditional 401(K) Contributions
For high earners, the shift to Roth catch-up contributions in 2026 may be less appealing. Roth accounts are funded with after-tax dollars, meaning contributions won’t reduce taxable income in the year they’re made. However, they do offer long-term benefits, such as tax-free withdrawals during retirement.
For those affected by the 2026 rule, rolling funds into a Roth IRA with fewer fees and broader investment options could be a more attractive alternative. Roth IRAs also allow tax-free withdrawals of earnings after age 59 1/2, aligning well with the needs of retirees.
Should You Take Advantage of the New Rules?
For workers between the ages of 60 and 63 with the financial means to make larger contributions, the super catch-up contribution in 2025 is a compelling opportunity. By saving more during their highest-earning years, they can enhance their retirement nest egg and enjoy immediate tax benefits.
After 2025, the shift to Roth-only catch-up contributions may reduce the tax advantages of contributing extra to a 401(k). Still, for many, the tax-free growth offered by Roth accounts can provide a valuable alternative.
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