In 2025, a key change is expected for 401(k) 'max savers', according to an expert. It's important to be informed about this change.

• In 2025, some older Americans may find it easier to set aside more for retirement savings, reducing their shortfall.
• The Secure Act 2.0, enacted in 2022, introduced several enhancements to retirement systems, including an increase in 401(k) plan catch-up contributions.
• In 2025, workers aged 60 to 63 can increase their annual 401(k) catch-up contributions to $10,000 or 150% of the catch-up limit, whichever is greater.

In 2025, some older Americans may find it easier to set aside more money for retirement savings.

In 2022, Congress passed the Secure Act 2.0, which brought about changes to retirement systems, including modifications to 401(k) plans, required withdrawals, and 529 college savings plans.

Another significant change for "max savers" will commence in 2025, as per Dave Stinnett, Vanguard's head of strategic retirement consulting, who has already implemented some Secure 2.0 changes.

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A CNBC survey of about 6,700 adults in early August found that nearly half of American workers are not adequately planning for retirement and saving, according to some reports.

Experts suggest that increasing the catch-up contribution limit for 401(k) plans, which is currently higher for workers aged 50 and older, could benefit certain savers.

Higher 401(k) catch-up contributions

For 2024, employees can defer up to $23,000 into 401(k) plans, with an additional $7,500 for workers aged 50 and above.

In 2025, workers aged 60 to 63 can increase their annual 401(k) catch-up contributions to $10,000 or 150% of the catch-up limit, whichever is greater. The IRS has not yet announced the catch-up contribution limit for 2025.

According to certified financial planner Jamie Bosse, senior advisor at CGN Advisors in Manhattan, Kansas, this can be an excellent way for individuals to increase their retirement savings.

In 2023, approximately 15% of eligible workers made catch-up contributions, as stated in Vanguard's 2024 How America Saves report.

While those who make catch-up contributions tend to be higher earners, they may still have concerns about their ability to retire comfortably, as Vanguard's Stinnett explained.

A Vanguard report found that over half of 401(k) participants with income above $150,000 and nearly 40% with an account balance of more than $250,000 made catch-up contributions in 2023.

Roth catch-up contributions

Another Secure 2.0 change will eliminate the initial tax exemption on catch-up contributions for high-income earners, requiring deposits to be made into after-tax Roth accounts.

Individuals who earned more than $145,000 from a single company the prior year and made catch-up deposits to 401(k), 403(b) or 457(b) plans will have their contributions adjusted for inflation annually.

The IRS postponed the implementation of the rule that would limit pretax 401(k) catch-up contributions until January 2026. As a result, workers can continue to make such contributions through 2025, regardless of their income.