In 2025, key changes to 401(k) plans will be implemented. It is crucial for savers to understand these changes.

• Secure 2.0, enacted in 2025, could simplify retirement savings through key 401(k) plan changes, experts predict.
• The new version of the sentence is: "The updated retirement plan includes higher catch-up contributions, more coverage for part-time workers, and automatic enrollment."
• A CNBC survey reveals that about 40% of American workers feel they are not adequately prepared for retirement savings.

Experts predict that upcoming changes to 401(k) plans may simplify retirement savings for some Americans.

In 2022, Congress passed "Secure 2.0," which brought about significant changes to the U.S. retirement system, including updates to 401(k) plans. Some of these provisions will take effect in 2025.

Approximately 40% of American workers admit to being behind in retirement planning and savings, mainly because of debt, insufficient income, or starting late, as per a CNBC survey conducted on around 6,700 adults in early August.

According to Dave Stinnett, Vanguard's head of strategic retirement consulting, 401(k) plans are the primary way most Americans prepare for retirement and can work very well when designed properly.

Here are some key changes for 2025 and what employees need to know.

'Exciting change' for catch-up contributions

In 2025, employees can contribute up to $23,500 into their 401(k) plans, an increase from $23,000 in 2024. Additionally, workers aged 50 and above can make up to $7,500 in catch-up contributions on top of the $23,500 limit.

In 2025, there will be an "exciting change" to catch-up contributions for a subset of older workers, thanks to Secure 2.0, as certified financial planner Jamie Bosse, senior advisor at CGN Advisors in Manhattan, Kansas, explains.

In 2025, employees aged 60 to 63 will be able to save a total of $34,750 with the increased catch-up contribution limit of $11,250, which is about a 14% increase from the current limit.

Nearly 14% of employees maxed out their 401(k) plans in 2023, according to Vanguard's 2024 How America Saves report, based on data from 1,500 qualified plans and nearly 5 million participants.

In 2023, an estimated 15% of workers made catch-up contributions in plans that allowed it, in addition to maxing out their contributions, according to the report.

Shorter wait for part-time workers

Access to 401(k) and 403(b) plans has been improved for certain part-time workers through Secure 2.0.

In 2025, the threshold for employers to extend plan access to part-time employees who worked at least 500 hours annually for three consecutive years drops to two consecutive years.

Stinnett stated that long-term part-time workers who may have faced challenges in qualifying for 401(k) eligibility would greatly benefit from this change.

In March 2023, 73% of civilian workers had access to workplace retirement benefits, and 56% of workers participated in these plans, according to the U.S. Bureau of Labor Statistics.

Alicia Munnell, director of the Center for Retirement Research at Boston College, stated that coverage is her area of expertise.

She emphasized the importance of coverage for individuals, whether they are working full-time or part-time at the same job.

Mandatory auto-enrollment for new 401(k) plans

Another Secure 2.0 change is auto-enrollment for certain 401(k) plans.

Starting in 2025, all 401(k) and 403(b) plans established after Dec. 28, 2022, must have an automatic enrollment of eligible employees with a minimum 3% deferral rate.

""Joining the program will undoubtedly result in an increase in membership and savings," Munnell stated."

Stinnett previously told CNBC that automatic enrollment and escalation, along with gradually increasing the contribution rate annually, are crucial plan designs to enhance savings.

Although experts suggest a 15% savings rate, most plans limit automatic escalation, with 63% of companies capping contributions at 10% or less of annual pay in 2022, according to the Plan Sponsor Council of America.