New Catch-Up Contribution Limits Set to Aid Older Workers’ Retirement Savings
A recent Voya Financial survey reveals that on average, American workers start saving for retirement at age 28. Many, however, wish they had begun earlier. Starting sooner often leads to significant investment earnings, minimizing the amount individuals must save themselves.
As workers approach their 50s and 60s, many find their savings fall short of expectations, raising concerns about outliving their financial resources. This worry is valid, but a new regulation effective next year may ease the financial strain for some workers in their 60s.
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Improved Catch-Up Contributions for Workers Over 60
For many years, retirement plans like 401(k)s have allowed individuals aged 50 and older to make catch-up contributions, which are additional funds beyond the IRS contribution limits. In 2024, those under 50 can contribute up to $23,000, while individuals 50 and older can contribute up to $30,500. These limits will increase to $23,500 and $31,000, respectively, for 2025.
Starting next year, adults aged 60 to 63 will benefit from an even higher catch-up contribution limit of $11,250, making their total possible 401(k) contribution $34,750. This new catch-up contribution will also be adjusted for inflation in subsequent years.
SIMPLE retirement accounts, generally available for companies with 100 or fewer employees, will also see an increase for those aged 60 to 63. Participants in these accounts will be able to contribute an additional $5,250 on top of the standard limits.
Who Can Take Advantage of These Changes?
Individuals who will turn 60 to 63 by December 31, 2025, are eligible for these increased catch-up contributions next year. No special steps are needed—just defer the necessary amounts from your paychecks as you normally would.
However, the assumption here is that you have extra funds to contribute. Many people may find financial constraints make this challenging. For those struggling to save, alternative strategies might be necessary, such as:
If these strategies fall short, delaying retirement could be a solution. While not ideal, this option can provide more time for savings to grow and lessen the financial burden post-retirement.
It is also wise to keep track of these new catch-up limits even if they don’t apply to you next year. Future raises may allow for more contributions later on. Be sure to check the annual limits regularly, as they are likely to increase over time.
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