The average American worker begins saving for retirement around age 28, according to a recent Voya Financial survey, but the majority wish they’d started earlier. This is understandable. The sooner you begin saving for retirement, the less of your own money you’ll likely have to contribute because you’ll have more investment earnings.
Many workers reach their 50s and 60s with far less savings than they’d like, and some fear they will outlive their money. It’s a valid concern, but a new rule change going into effect next year could make things a little easier for some workers in their 60s.
Catch-up contributions are getting an upgrade
Retirement plans such as 401(k)s have allowed workers 50 and older to make catch-up contributions for years. These are additional contributions beyond the annual limit set by the IRS. For example, in 2024, those under 50 can contribute up to $23,000 to a 401(k) while those 50 and older by Dec. 31 can contribute up to $30,500. These limits will rise to $23,500 and $31,000, respectively, for 2025.
But starting next year, there’s going to be an even higher catch-up contribution limit for adults aged 60, 61, 62, and 63. This catch-up contribution will be $11,250 next year, which gives them a total possible 401(k) contribution of $34,750. This catch-up contribution will be indexed for inflation in future years.
SIMPLE retirement accounts, available with some businesses with 100 or fewer employees, will also see an increased catch-up contribution next year for adults aged 60 to 63. They will be allowed to set aside up to $5,250 in addition to the standard contribution limit for all SIMPLE plan participants.
