Exciting Changes Ahead for 401(k) Plans in 2025

Joining your workplace 401(k) can significantly boost your retirement savings.

One of the great features of a 401(k) is the automatic funding through payroll deductions. Once you enroll, your employer handles the contributions, which often helps you stay on track with your savings goals compared to managing an IRA independently.

If you are currently part of a 401(k) plan, note that some rules will improve starting in 2025. Here’s what you need to know.

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Increased 401(k) Contribution Limits

Maxing out your 401(k) plan can be challenging, but for those with higher incomes or strong budgeting skills, it may be achievable. Fortunately, in 2025, 401(k) contribution limits will increase. If you’re under 50, you can contribute a maximum of $23,500, up from $23,000 in 2024.

The regular catch-up contribution for those aged 50 and older will remain at $7,500. Therefore, for many savers aged 50 and over, the maximum contribution will be $31,000 next year. However, there’s a new super catch-up option for some older workers.

Individuals aged 60 to 63 in 2025 can make a catch-up contribution of $11,250, which replaces the standard $7,500 catch-up. If you’re in this age group, your total contribution limit will be $34,750 for your 401(k). This increase can be particularly beneficial if you feel your retirement savings need a boost.

It’s important to clarify that eligibility for catch-up contributions is based solely on age, not your 401(k) balance. Whether your account holds $50,000 or $2 million, you can still make catch-up contributions of either $7,500 or $11,250 in 2025, depending on your age.

Also, bear in mind that traditional 401(k) contributions can reduce your taxable income. Therefore, making catch-up contributions is worthwhile, even if your retirement savings are already substantial.

Set Yourself Up for Financial Success

The more you contribute to your 401(k) in the coming year, the more wealth you can accumulate for retirement, along with potential tax benefits. Review your current contributions and see if you can increase them in 2025.

If you receive a salary raise, consider directing that additional income into your 401(k) from the first paycheck of 2025. This approach can help you ignore the extra funds while enhancing your savings for the future.

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