As pensions have all but gone by the wayside in corporate America, defined contribution plans like 401(k)s and 403(b)s are becoming increasingly more common. By automating contributions from your paycheck, saving up for retirement becomes even easier—a simple “set it and forget it” approach means your savings grow without that money possibly ever being missed.
You’re also likely aware of some limitations to your 401(k) plan—namely how much you can contribute annually and when you’re able to make withdrawals (without penalty).
With recent legislative changes now in effect, however, some people preparing for retirement will be able to benefit from greater contribution limits than ever before. If you’re approaching retirement age and looking to sock away as much savings as possible in a tax-advantaged account, these changes may just be the advantage you need.
Catch-up contribution basics
Catch-up contributions have traditionally been available to those 50 and older who were contributing to a workplace retirement plan, like a 401(k) or 403(b), or an individual retirement account (IRA). This additional contribution went above the annual contribution limit, increasing it for those who were approaching retirement (hence the idea of “catching up” with their savings).
While catch-up contributions for employer-sponsored retirement plans have commonly been adjusted for inflation each year (along with the baseline contributions), IRA catch-up contributions were not.1
What’s changed?
The SECURE Act 2.0 passed in December 2022, which implemented widespread changes to retirement savings and withdrawal rules for tax-deferred accounts, including 401(k)s and IRAs. As part of this ruling, catch-up contribution limits increased for certain individuals.
401(k)s, 403(b)s, 457s
In 2025, plan participants can contribute up to $23,500 to their 401(k) plan. For anyone over 50, there is an additional catch-up contribution limit of $7,500 (for a total of $31,000).2
Here’s what’s new: For individuals who are still working and contributing to a 401(k) between the ages of 60 and 63, their catch-up contribution is $11,250 (for a total of $34,750). That’s an additional $3,750 in tax-deferred contributions.2
Moving forward, these “supersized” catch-up contributions will either be $10,000 or 50% more than the regular catch-up contribution amount (whichever is greater).1 For this tax year, the contributions were determined by adding $3,750 (50% of $7,500) to $7,500 for a total of $11,250 (which exceeds $10,000).
IRAs
If you’re eligible to contribute to an IRA, there are no additional catch-up contributions for older workers preparing for retirement. In 2025, the standard contribution limit is $7,000, with a catch-up contribution for those 50 and older of $1,000 (for a total of $8,000).2
Keep in mind, you can make contributions toward the current tax year up until you file your tax return the following April. In other words, you can put money toward your 2024 IRA contribution limit up until April 15, 2025 (or until you file your return, whichever comes first).
While IRAs aren’t offering supersized catch-up contributions, the SECURE Act 2.0 does implement cost-of-living adjustments moving forward for IRAs.1
SIMPLE IRAs
For small business owners with Savings Incentive Match Plan for Employees (SIMPLE) IRAs, catch-up contributions have received similar adjustments to traditional 401(k)s.
The standard contribution limit for 2025 is $16,500, with a catch-up contribution limit of $3,500 for those 50 and older. For any participant between the ages of 60 and 63, the catch-up contribution limit jumps to $5,250.2
In total, plan participants over 50 may contribute up to $20,000 in 2025, and those up to age 63 may contribute $21,750.
What if I’m 64 or older?
You may have noticed the supersized catch-up contributions are limited to a small subset of pre-retirees—those between the ages of 60 and 63. If you are 64 or older, or between the ages of 50 and 59, you may still make regular catch-up contributions to your retirement savings plan, but you are not eligible for the additional catch-up contributions.
Should you take advantage of extra catch-up contributions?
Now that we have a good understanding of what’s changing in the world of catch-up contributions, let’s apply them to your specific retirement planning circumstances.
If you’re still working and within the supersized catch-up contribution window, you have the opportunity to increase your future retirement income and enjoy immediate tax benefits. But before increasing your automatic deferral rate, here are a few considerations to make first:
1. Do you need the additional savings for retirement?
Just because the option to save more is available doesn’t necessarily mean it’s the right option for you. If you’ve been a lifelong diligent saver and have a well-funded retirement ahead of you, could that extra cash be used elsewhere? Perhaps you could put it toward paying down your mortgage before retirement, or funding more short-term goals, like purchasing a new car or taking your family on a vacation.
On the other hand, this is an opportunity to increase your tax-deferred savings for retirement at a pivotal moment. You’re likely at or approaching your peak earning years, meaning additional tax deductions could have a meaningful impact on your tax bill now and over the next few years. The extra boost to your retirement income can also help your savings grow to address potential income gaps.
2. Is your future retirement income tax diversified?
Remember, contributions to your 401(k) or IRA reduce your taxable income now, but they create taxable income in retirement. For that reason, it’s important to diversify your income sources for retirement using funds that fall into different tax “buckets,” including taxed (or tax-deferred), tax-free, and tax-advantaged.
While your 401(k) or IRA withdrawals are taxed, qualified withdrawals from Roth accounts or income from municipal bonds are typically tax-free. You can generate tax-advantaged withdrawals by funding investments with after-tax dollars, such as CDs and brokerage accounts. Depending on the circumstances of the sale, you may be able to enjoy lower capital gains tax rates, as compared to your marginal tax rate.
If you’ve been “overfunding” one tax bucket and neglecting the others, it might make sense to direct those additional dollars to other savings vehicles. Doing so could help you manage your future tax bills in retirement.
3. More contributions mean more RMDS
Along the same lines, it’s worth noting that the more you contribute to your tax-deferred accounts, like a 401(k) or IRA, the more you’ll have to manage when it comes to taking required minimum distributions (RMDs) in the future.
The current age for RMDs is 73, though it will increase to 75 in 2033.1 RMDs are, of course, mandatory, and the distributions do add to your taxable income. Knowing when you’ll need to begin taking RMDs and roughly how much you’ll be required to withdraw each year is helpful, however, for strategizing ahead of time.
For example, you may want to consider converting some of your tax-deferred savings to a Roth IRA and paying the tax bill ahead of retirement (or during a year when your other taxable income is unusually low). Or, you can start drawing down from your accounts earlier than the RMD age to reduce the account size ahead of time.
Incorporating major changers into your retirement plan
With the option for some employees and pre-retirees to contribute more than ever to their retirement accounts, now could be an ideal time to reassess your current retirement savings strategy and decide if it’s time to increase contributions.
Any time you’re making decisions about funding or withdrawing from your retirement accounts, it may be wise to speak with a financial advisor who can help you decide the best move for your specific circumstances and needs.
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