Congress passed the Secure 2.0 Act in 2022, to expand saving opportunities for individuals who have access to savings vehicles like 401(k)s and workplace savings plans. Several of the bill’s provisions go into effect in 2025, and if you’re like many workers, your 401(k) or workplace savings plan is likely the foundation of your retirement savings strategy. Explore the changes happening to 401(k)s below to determine if your retirement savings strategy may be affected.
Expanded standard contribution limits for all. For those that are able to “max out” their workplace savings plan, there is an increased contribution limit in 2025. Employees of any age will have the ability to save up to $23,500 (or 100% of their income, whichever is less), in their 401(k) plan. This is a $500 increase over the 2024 contribution limit.
Special rules for those ages 60 to 63. Under SECURE 2.0 Act provisions, 2025 brings new savings limits for those who turn age 60, 61, 62, or 63, by the end of the calendar year, if their plans offer catch-up contributions. Individuals in this age segment can take advantage of a new, special catch-up contribution limit that enhances their savings opportunity. Rather than the standard $7,500 catch-up contribution, those ages 60-63 can save $11,250 in 20251.
The new savings limits create an important opportunity, particularly for those who later in life might be in a financial position to dedicate larger sums toward retirement savings. For those ages 60-63, total 2025 401(k) contributions top out at $34,7502. The special catch-up provision means someone turning 60 in 2025 could set aside close to $140,000 in tax-deferred retirement savings, over a critical four-year period. Once you turn 64, the standard catch-up contribution limit of $7,500 again applies. Talk to your financial advisor to determine if taking advantage of these increased contributions limits makes sense for your retirement plan.
Automatic enrollment. The SECURE 2.0 Act provisions expand automatic enrollment in 401(k) and 403(b) plans to companies that have employees who are not already enrolled. Under the rules, plans established on or after Dec. 29, 2022, must, in 2025, implement an automatic enrollment feature. This means that employees, by default, will be enrolled to participate in the plan. The minimum automatic enrollment contribution percentage for 401(k) or 403(b) plans is 3% of annual income and cannot exceed 10%. It also requires that the amount deferred into the plan increase by 1% per year, until the 10% deferral level is reached 2. Employees can choose to opt out of plan participation, but this automatic enrollment feature is set to encourage employees to take advantage of workplace retirement savings plans. Check with your employer to see if the automatic enrollment feature will affect your contributions.
Determining how much to set aside for retirement, and in what types of savings vehicles, is best decided through careful planning. The start of a new year is a great time to consider if you want to change or start contributions to these types of accounts. Discuss your retirement strategy with your financial advisor, and consult with a tax professional on all tax-related matters.
- “Notice 2024-80, 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living” Internal Revenue Service.
- “Five Changes Coming to IRAs and 401(k)s in 2025”, November 2025. Compiled by Kiplinger Magazine. https://www.kiplinger.com/retirement/iras/changes-coming-to-iras-next-year
Carrie A. McPherson, CRPS®, CDFA®, ChSNC® is a Financial Advisor and Certified Divorce Financial Analyst with Park Row Wealth Advisors, a financial advisory practice of Ameriprise Financial Services, Inc. in Providence, RI. She specializes in fee based financial planning and asset management strategies and has been in practice for 15 years. Please contact her at https://www.ameripriseadvisors.com/team/park-row-wealth-advisors or (401)824-2557, 1 Citizens Plaza Ste 610 Providence, RI 02903.
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