As part of the recent SECURE 2.0 Act changes, enhanced catch-up contributions in 2025 are providing older workers an exciting opportunity to supercharge their retirement accounts. If you’re approaching retirement, then this major change could significantly boost your retirement savings potential.

Here’s what you need to know about this new feature and how it can impact your financial future.

What are enhanced catch-up contributions?

Catch-up contributions are additional amounts workers aged 50 or older can contribute to their retirement plans, such as a 401(k), 403(b), governmental 457(b) plan, and SIMPLE IRA, beyond the standard limits.

This year, a new “enhanced” catch-up provision will raise the stakes even higher for individuals aged 60, 61, 62, and 63.

Under this new rule:

• Workers in these specific age brackets can contribute the greater of $10,000 or 150% of the standard catch-up limit (adjusted annually for inflation).
• Eligible workers can take advantage of elevated contribution limits during a narrow, four-year window before transitioning into traditional retirement catch-up rules at age 64.

The chart below (Lord Abbett, 2024) offers a more in-depth look at catch-up contributions by age and account type.

Notably, for individuals earning more than $145,000 in the prior year, all catch-up contributions to workplace retirement plans must be made on a Roth basis using after-tax dollars. This ensures tax-free growth but may require adjustments to your savings strategy.

Who benefits from the 2025 retirement contribution changes?

The 2025 enhanced catch-up contributions are ideal for:

• Late savers: Those catching up on retirement savings after focusing on other priorities earlier in life.
• High earners: Individuals in peak earning years looking for ways to maximize tax-advantaged savings.
• Those near retirement: Older workers who want to boost their retirement nest egg in the final stretch of their careers.

How to prepare for higher contribution limits in 2025

Many Americans face a shortfall in retirement savings, and these enhanced catch-up contributions offer a targeted solution.

With increased longevity and rising healthcare costs, the ability to save more in a short time is critical for achieving a secure retirement. To make the most of this opportunity, consider these steps:

1. Evaluate Your Savings Plan

Confirm your eligibility for enhanced contributions starting in 2025, and ensure your retirement account provider is prepared to implement these updates.

2. Update Your Budget

Adjust your financial plan to allocate additional funds for savings during the enhanced catch-up period.

3. Seek Professional Guidance

A financial advisor can help you understand how these changes align with your broader financial goals, particularly with the shift toward Roth catch-up contributions.

Maximize your retirement savings

Enhanced catch-up contributions are a game changer for retirement savers entering the final phase of their careers.

By planning ahead and taking advantage of this provision, you can put yourself in a stronger financial position for the retirement you’ve always envisioned.

When you’re ready to discuss the 2025 enhanced catch-up contributions and how you can boost your retirement savings, reach out to me. I’d be happy to have more conversation with you!