2025 Is Here, And So Are These 3 Big Changes to Retirement Savings Rules
Laurence Hale, AAMS®, CRPS®
Principal/Managing Partner, Investment Advisor & Chief Investment Officer
The SECURE 2.0 Act continues to roll out significant changes to retirement savings rules, with 2025 bringing some of the most impactful updates yet – especially for those nearing retirement. But no matter what your age, it’s important to understand how these changes could affect your financial future and the opportunities they present for maximizing your retirement savings potential. The economic soft landing is one of two major developments this year that pleasantly surprised investors and helped the S&P 500 climb roughly 25% through the start of December. The other was the resounding election victories of President-elect Donald Trump and the Republican party.
Here are three key changes coming in 2025 that deserve your attention:
1. Higher Catch-Up Contribution Limits for Ages 60-63
This is perhaps the most significant change, offering a remarkable opportunity for those in their early 60s to accelerate their retirement savings. Starting in 2025, if you're between ages 60 and 63, you'll be able to contribute the greater of $10,000 or 50% more than the regular catch-up amount to your workplace retirement plan.
Let's look at what this means in real dollars. Consider this example:
Sarah is 61 and wants to maximize her retirement savings. Under current rules, she can make a standard contribution of $22,500 plus a catch-up contribution of $7,500, for a total of $30,000. But in 2025, she could potentially contribute up to $37,500 ($22,500 plus the new higher catch-up of $15,000). That's an additional $7,500 per year she can invest for her future.
Over just the three years she's eligible (ages 61-63), assuming a 6% annual return, this extra contribution could add approximately $24,000 more to her retirement savings compared to using the standard catch-up amount. That's a meaningful difference that could provide greater financial confidence in retirement.
2. Expanded Automatic Enrollment in Retirement Plans
Beginning in 2025, most new 401(k) and 403(b) plans will be required to automatically enroll eligible participants. This change reflects what we've long known as strategic financial advisors – sometimes the hardest part of saving for retirement is just getting started.
The initial automatic enrollment amount will be at least 3% of salary, but not more than 10%. Additionally, there will be automatic annual increases of 1% until the contribution reaches at least 10% (but not more than 15%) of salary. This "set it and forget it" approach helps ensure consistent saving and investment for retirement.
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3. More Part-Time Workers Gain Access to Retirement Plans
The third major change expands retirement plan access to part-time workers. Starting in 2025, employees who work at least 500 hours per year for two consecutive years (down from the current three-year requirement) must be allowed to participate in their employer's 401(k) plan. This is particularly relevant for those considering a phased retirement or who work part-time while caring for family members.
Strategic Financial Planning Considerations
These changes offer several potential financial planning opportunities. For those ages 60-63, now is the time to begin planning how to maximize the higher catch-up contribution limits. This might involve adjusting your budget or reviewing other savings vehicles to redirect funds to take full advantage of this opportunity.
If you're an employer, you'll want to ensure your retirement plan documents are updated to reflect these changes and that you have proper procedures in place for automatic enrollment.
And for part-time workers, 2025 presents a new opportunity to begin building retirement savings through an employer plan, potentially with employer matching contributions.
These changes represent significant opportunities to enhance your retirement savings strategy, but they also add complexity to an already complex landscape. At WHZ Strategic Wealth Advisors, we're here to help you navigate these changes with absolute confidence through our unwavering partnership approach.
Whether you're looking to maximize your catch-up contributions, adjust your retirement timeline, or simply ensure your current strategy aligns with these new rules, we can help you create and execute a plan that works for your unique situation. Contact us for a complimentary consultation on our website at whzwealth.com, or give us a call at (860) 928-2341.
Authored by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.
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