What to Know About SECURE 2.0’s New Catch-Up Contribution Rules

As a financial adviser offering comprehensive financial planning, we’re always on the lookout for ways clients can maximize their retirement savings.

One exciting change is coming in 2025, thanks to the SECURE 2.0 Act: enhanced catch-up contributions for people in their early 60s. These “super catch-up contributions” offer a valuable opportunity to save more during your peak earning years – and reduce your taxable income at the same time.

Here’s a breakdown of what this means for you and how you can take advantage of it.

What Are Catch-Up Contributions?

If you’re age 50 or older, you’ve likely heard of catch-up contributions. These are additional amounts you’re allowed to save in your employer-sponsored retirement accounts – like a 401(k), 403(b) or 457(b) – above the standard contribution limits.

For 2024, the standard contribution limit is $23,000, and the catch-up contribution limit is $7,500. That means anyone age 50 or older can contribute a total of $30,500 to their retirement plan this year.

Catch-up contributions are optional, but they’re a fantastic tool if you want to accelerate your savings, especially if you’re getting closer to retirement and want to make up for earlier years when saving might not have been a top priority.

What’s New in 2025? The Enhanced “Super Catch-Up” Rules

Starting in 2025, the SECURE 2.0 Act introduces enhanced catch-up contributions for individuals aged 60, 61, 62 and 63.

Here’s how it works:

• If you fall within this age range, you’ll be eligible to contribute up to $11,250 more than the standard catch-up limit.
• Combined with the regular contribution limits, your total retirement plan contribution for 2025 could reach $34,750.

This increased allowance applies to employer-sponsored retirement plans that already offer catch-up contributions, such as the aforementioned 401(k)s, 403(b)s and 457(b)s.

However, not all employers are required to adopt these changes. Each plan sponsor has the option to implement – or not implement – this feature. That’s why it’s crucial to confirm whether your employer’s retirement plan will offer the enhanced contribution option.

Who Qualifies for the Super Catch-Up Contribution?

To qualify for this new provision, you’ll need to meet the following criteria:

1. Be age 60, 61, 62 or 63 by the end of the calendar year.
2. Be an active participant in an eligible retirement plan.
3. Generally, have already contributed the maximum allowed under the regular deferral and catch-up limits.

It’s worth noting that once you turn 64, you’ll revert to the standard catch-up contribution limits.

Why This Matters: Bigger Savings, Lower Taxes

The “super catch-up contributions” aren’t just about saving more – they’re also a smart tax strategy. Contributions to traditional retirement accounts are tax-deferred, which means they can lower your taxable income in the year you make them.

For example, if you’re in a higher tax bracket during your early 60s, maxing out your contributions could significantly reduce your tax liability. Plus, the extra savings can provide a substantial boost to your retirement nest egg.

What About Roth Contributions for High Earners?

Another important SECURE 2.0 provision is on the horizon, though it won’t take effect until 2026. If your wages exceed $145,000 (adjusted for inflation) in the prior year, any catch-up contributions you make will need to go into a Roth account.

Roth contributions are made with after-tax dollars, so you’ll pay taxes upfront but enjoy tax-free withdrawals in retirement. While this provision adds complexity, it could also be beneficial depending on your financial situation and long-term goals.

How to Get Ready for the Changes in 2025

Here’s how you can prepare for the new rules:

1. Talk to Your Employer: Confirm whether your retirement plan will implement the enhanced catch-up contribution option.
2. Review Your Finances: Make sure you’re contributing the maximum allowed now so you’re ready to take full advantage of the super catch-up limits.
3. Plan Strategically: Work with a financial adviser (like us!) to integrate these changes into your overall retirement strategy, ensuring you’re making the most of this opportunity.

The Bottom Line

The SECURE 2.0 Act’s enhanced catch-up contributions are a game-changer for those in their early 60s. If you qualify, this could be your chance to supercharge your retirement savings, reduce your taxes and feel more confident about your financial future.

Have questions about how this could work for you? Let’s talk! Click here to schedule a free retirement consultation today. We’re here to help you navigate these changes and ensure you’re on track to meet your goals.