SECURE 2.0 Boosts 401(k) Catch-up Limit for Older Participants
A new year typically brings cost-of-living increases in the IRS limits on retirement plan contributions. Indeed, the basic limit on 401(k) elective deferrals increases by $500 to $23,500 in 2025.
However, retirement plan savers can look forward to a special change as they turn the calendar this year: beginning in 2025, you may be able to put away even more in your 401(k).
The SECURE 2.0 Act of 2022 was enacted at the very end of 2022. SECURE 2.0 made significant changes to the rules governing qualified retirement plans. Many of these changes take effect on a delayed basis. SECURE 2.0 modified the rules for “catch-up” contributions to 401(k) plans. This modification increases the elective contribution amount for employees who are ages 60 to 63 effective January 1, 2025. 401(k) plan participants who have attained age 50 are currently permitted to make catch-up contributions in excess of the basic limit on 401(k) elective deferrals.
The limit on catch-up contributions for 2025 is $7,500. SECURE 2.0 increases the catch-up contribution limit to the greater of $10,000 or 150% of the regular catch-up limit in 2024 (both such amounts are indexed for inflation) for each of the calendar years in which a participant attains ages 60, 61, 62 and 63. Accordingly, your catch-up limit is increased to $11,250 in 2025 if you were born in 1962, 1963, 1964 or 1965.
Taking into account both the basic elective deferral limit as well as the additional catch-up allowance, your maximum 2025 401(k) contribution is the following depending upon your age on December 31, 2025:
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