This significant change could boost your retirement savings as you approach retirement.
The SECURE 2.0 Act has brought about major updates to retirement savings regulations in recent years. Starting this year, workers aged 60 to 63 can augment their retirement savings with an expanded “super catch-up” contribution under new rules created by the IRS last year as part of a package of inflation adjustments to retirement account contributions. This applies to 401(k), 403(b), governmental 457(b) and SIMPLE IRA plans that already offer catch-up contributions.
If you meet certain criteria, this is an opportunity to boost your retirement contributions as you near retirement age. Those eligible can add $11,250 per year to their 401(k) accounts (up for the regular catch-up contribution of $7,500), increasing their overall annual contribution limit to $34,750.
This change represents one of the biggest shifts in 401(k) contribution rules in 20 years. If you are between the ages of 60 and 63 and are saving for retirement with a 401(k), this allows you to contribute about 14% more than in 2024 (2% of this increase is due to a cost-of-living adjustment – or COLA – that is often applied to contribution limits). The standard 401(k) limit for 2025 is $23,500, with a regular catch-up for those 50 and older of $7,500, meaning the "super catch-up" represents an additional $3,750 for qualifying participants. Once a participant turns 64, they revert to the age 50 and older (or +) catch-up contribution limit in effect for that year.
The higher limit can enable older Americans to bolster their retirement funds, with high earners who have the financial means to maximize their savings able to benefit the most from the adjustment.
"Super catch-up" contributions can be made to either traditional pretax 401(k) accounts or Roth 401(k) accounts, if your employer currently offers the option. Pretax contributions to 401(k) accounts reduce current taxable income, while Roth contributions – which require that taxes be paid upfront – allow funds to be withdrawn tax free. This may change next year, however, as all catch-up contributions will be required to go into Roth accounts for individuals with income above a certain threshold under another provision of SECURE Act 2.0, unless the delay in implementation is extended further.
There are some hurdles to taking advantage of the new rules. Not all retirement plans can accommodate the new contribution limits, and your company’s payroll system needs to be aligned with retirement-plan administration.. It’s important to check with your plan administrators to understand how your specific retirement plan handles "super catch-up" contributions and any potential matching.
If you are interested in taking advantage of the "super catch-up", it‘s a good idea to plan ahead as much as possible. Those who are turning 60 before the end of a tax year can begin contributing at age 59, as long as they meet the other requirements. Conversely, if you turn 64 within the tax year, you will need to revert to the regular catch-up limits.
To help you navigate the complexities and ensure you are maximizing your benefits while adhering to the new rules, consult your financial advisor. They can provide guidance on how these changes can fit into your overall retirement strategy and align with your long-term financial goals.
401(k) plans and Roth 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings from a 401(k) plan will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Roth 401(k) participants are subject to required minimum distributions at age 72 (70 ½ if you reached 70 ½ before January 1, 2020).
