To start, individuals can contribute up to $23,500 — an extra $500 from the 2024 limit — to their 401(k) plans in 2025, according to the IRS announcement. The base applies to younger savers, as well as older workers.
Catch-up contributions, if you qualify, allow you to save even more than that initial limit. So there’s a maximum $7,500 catch-up contribution for one group of older workers. And there’s maximum $11,250 catch-up contribution for another group.
The total possible contribution allowed in a 401(k) plan is $34,750 for those aged 60 through 63 in 2025.
The most savings allowed in a 401(k) is $31,000 in 2025 for other employees aged 50 through 59, and then 64 and older. The catch-up contribution for that group remains at $7,500 for 2025.
Yes, people are bound to be confused. We’re talking about an entirely new rule here — and one that applies to some people but not to others.
Kirsten Hunter Peterson, vice president of workplace thought leadership for Fidelity Investments, said we are looking at a change that is a permanent provision.
“For example, if you’re age 56 today, you can expect to have the opportunity to save up to the higher dollar threshold when you reach age 60,” Hunter Peterson said.
Your employer would need to offer these new, supersize catch-up contribution limits to its workers next year. But Fidelity expects that the majority of plan sponsors could offer the increased catch-ups, based on discussions with plan sponsors.
Another twist is ahead for some higher-paid executives, managers and others. Beginning in 2026, employees earning $145,000 or more each year would be required to make any of their catch-up contributions into a Roth. By contributing to the Roth, these employees wouldn’t be getting an upfront tax break for those extra contributions.
Beginning in 2026, higher-paid employees could end up paying upfront taxes on some extra retirement savings set aside under catch-up provisions at a time when they’re generating the most taxable income.
The Roth requirement applies to the existing catch-up contributions for savers 50 and older, as well as the new “super” catch-ups for savers ages 60 through 63 in that higher-income group, Hunter Peterson said.
As you’re working, you don’t get an upfront tax break on contributions made into a Roth 401(k) each year, as you would with a traditional 401(k). The traditional 401(k) has tax-deductible contributions but you’re stuck with taxable withdrawals.
This year, the Roth 401(k) option did become more attractive based on another change packed into the SECURE 2.0 Act. Required minimum distributions are no longer required for Roth 401(k)s beginning in 2024. If you don’t need the money, you won’t be required to withdraw it in your 70s and you’d be able to let it keep growing tax-free.
Can anyone really save $34,750 in a year for retirement?
But honestly, who can be expected to save $34,750 for retirement when they’re working in their early 60s next year?
“You’d be surprised, it’s not always the people who make the most money who are able to save this much,” said Melissa Joy, president of Pearl Planning, a wealth adviser in Dexter.
Yes, she acknowledged that the “well-paid supersaver is going to always be looking for an opportunity and will likely have the capacity to save even more.”
But someone who has few bills and little debt — someone who has already put their children through college — also has a shot at being able to save more for retirement than some might expect.
“If you were a disciplined saver who has paid down debt or maybe has a low-interest rate mortgage, you may be able to max out even if you are making $100,000 or so,” Joy said.
“Some people have experienced a lot of income growth, along with the pain of inflation, and they are a perfect group to save more,” she said.
At the same time, Joy acknowledged, she’s seen other families who always maxed out their retirement savings each year but, quite honestly, need to give themselves more breathing room as they get older and face extra pressures sending their children to college or taking care of aging parents.
She has advised some to “take the foot off the retirement savings gas to give some extra room in the budget for their family’s current needs, even if they have a higher income.”
