4 Major Changes That Could Reshape How You Save for Retirement in 2025
Four crucial parts of the SECURE 2.0 Act will take effect in 2025, adding to a sweeping list of changes already enacted by the biggest overhaul of American retirement laws in over a decade.
Signed in December 2022, the wide-ranging legislation impacted rules related to 401(k)s and individual retirement accounts, also known as traditional IRAs. Notably, the law has already raised the age when account holders typically must take required minimum distributions from these tax-advantaged accounts from 72 to 73 (and scheduled another increase to 75 for 2033). That means if you turned 73 this year, you may be coming up on an April 1, 2025, deadline to take your first RMD.
In 2025, other portions of SECURE 2.0 will phase in, allowing workers to save more money in tax-advantaged accounts. Here are four things to have on your radar that could affect your retirement:
A 'super' twist to 401(k) catch-up contributions
Next year, 401(k) account holders ages 60 to 63 will be able to make the largest maximum annual contributions ever — by a significant amount — due to the SECURE 2.0 Act's creation of "super" catch-up contributions.
The most popular employee retirement plan in the U.S., 401(k)s allow millions of workers to contribute pre-tax dollars to accounts that offer investment options like mutual funds and exchange-traded funds (ETFs). The distributions are taxable, but account holders typically take them in retirement when in a lower tax bracket, therefore saving money.
The IRS caps how much you can contribute to a 401(k) in a year, limiting the potential tax benefits. In 2025, individuals will be subject to an annual contribution limit of $23,500. Workers 50 and older can also make catch-up contributions up to $7,500 for a total of $31,000.
But new in 2025, people ages 60 to 63 will be able to make an additional contribution — the so-called "super" catch-up — of up to $3,750. For these folks, the new max annual 401(k) contribution ($34,750) is a 14% increase from the 2024 maximum of $30,500.
In addition to 401(k)s, these limits also apply to 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan. Eligible participants can set aside as much as $11,250.
Starting in 2025, as a result of a SECURE 2.0 Act change, employees ages 60 to 63 with SIMPLE retirement accounts will be able to make additional make-up contributions, as well, up to a combined limit of $5,250, according to the IRS.
New auto-enrollment rules for 401(k)s
Certain employers will be required to auto-enroll qualifying employees in 401(k) plans and 403(b) plans under a new rule that goes into effect on Jan. 1. The rule only applies to plans that were created after Dec. 28, 2022, and there are some exclusions, like an exemption for employers with 10 or fewer employees.
Workers will still have the option to opt out or change their deferrals, but enrollment with a contribution rate between 3% and 10% of their salary is supposed to be the default.
The auto-enrollment changes in SECURE 2.0 are aimed at boosting participation rates in 401(k) plans. Economists have shown that automatic enrollment reliably achieves that goal of increasing how many people are saving for retirement.
401(k) coverage for part-time workers
The SECURE 2.0 legislation added requirements for employers to allow certain part-time employees to participate in their 401(k) plans.
In 2025, part-time workers who've worked between 500 and 1,000 hours per year for two consecutive years at the same company will be able to enroll — an easing from the current three-year requirement.
What about part-time workers who log over 1,000 hours? They must allowed to participate in their employer's 401(k) program after one year. (This rule isn't changing in 2025.)
Recovering lost retirement accounts
The SECURE 2.0 Act directed the Department of Labor to create a "Retirement Savings Lost and Found" database by the end of 2024. The online searchable database will help Americans find lost retirement plans and benefits they are owed in 2025 and beyond. The site is expected to launch imminently.
Retirement plans can easily get lost when employees change jobs or when companies merge. In other situations, retirement plans may lose their line of communication with participants or beneficiaries when contact info changes.
The department is requesting data from plan administrators on a voluntary basis to build out the database. It's supposed to empower people to recover any lost funds.
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