The stakes for Americans’ personal finances are high in the coming years amid the potential imposition of massive tariffs and the uncertainty of tax cut extensions. One guarantee: Some retirement savers will be able to put even more into their workplace accounts.
Starting next year, Americans ages 60-63 will be able to contribute up to $11,250 in additional funds to their 401(k)s, 403(b)s, or 457(b) plans, SECURE Act 2.0, a 2022 Thanks to the law, which made several changes to retirement accounts and investments, including pushing back the required age for minimum distributions and loosening restrictions on withdrawals.
Currently, workers can contribute up to $23,500 to a 401(k) or similar employer retirement plan in 2025, and those 50 and older can make a “catch-up” contribution of $7,500 for a total of $31,000. can But thanks to the SECURE Act, next year a select group of savers in their early 60s will be able to supercharge that catch-up contribution, putting a total of $34,750 into a workplace account in 2025, if they can afford it and their employers allow it.
Savers are eligible for so-called enhanced catch-up contributions if they reach age 60, 61, 62, or 63 during the calendar year. At age 64, they are no longer eligible for increases, but can still make standard catch-up contribution amounts. The enhanced catch-up contribution limit is $10,000 or 150% of the standard age 50+ catch-up contribution limit, whichever is greater.
The chart below shows how much workers of different ages will be able to contribute next year.
The change is intended to help those approaching retirement supercharge their savings, particularly if they previously fell behind on their contributions. But according to Vanguard, only 15 percent of those with workplace retirement plans contributed to the typical catch-up last year, and those are significantly wealthier than the average saver: 55 percent earn at least $150,000. are and account for 39%. Balance over $250,000.
Why invest more?
Financial planners say there’s nothing wrong with contributing more if you’re financially able. Not only will you have more for retirement, but you’ll also get the tax benefits of contributing more to a 401(k). But New York-based certified financial planner (CFP) Melissa Murphy Pavone encourages workers not to wait until age 60 to turbocharge their savings.
“By maximizing your retirement contributions, you’re building a solid financial foundation for your future,” she says. “Catch-up contributions provide over-50s with a valuable opportunity to accelerate their retirement savings.”
Enhanced contributions also depend on the employer, so not everyone has access to them, notes Melissa Caro, CFP and founder of My Retirement Network. Also, those approaching retirement should consider their liquidity needs. Depending on your current and future needs, it makes more sense to keep extra money in savings rather than investing in them.
“Funds in retirement accounts come with withdrawal restrictions,” says Caro. “Investing these additional contributions in higher-risk assets may expose near-retirees to market downturns, while increasing required minimum distributions in retirement may affect taxable income, potentially This may affect Medicare premiums and Social Security benefits.”
Contribution and catch-up limits for Individual Retirement Accounts, or IRAs, are not changing. Savers can contribute $7,000 to a traditional or Roth IRA next year, while those 50 and older can contribute an additional $1,000.
