The US government has introduced a new perk for savers in 401(k)s and other employer-sponsored retirement plans. Starting this year, eligible workers aged 60 to 63 can take advantage of enhanced catch-up contributions, allowing them to save more for retirement.
The additional catch-up amount is equal to 50% of the existing catch-up limit. For 2025, it’s $3,750 on top of the regular catch-up limit of $7,500, bringing the total contribution limit to $34,750. This change aims to help close the retirement savings gap.
Experts say this new rule can give people close to retirement a chance to boost their accounts with extra savings. Jonathan Lee at U.S. Bank Private Wealth Management recommends eligible savers take advantage of the enhanced catch-up contribution, as it’s a good development for those nearing retirement.
By saving more in a tax-deferred account, individuals can reduce their tax bill and grow their contributions over time. The enhanced catch-up contribution is particularly beneficial for those who are behind on their savings or want to make up for lost time.
However, it’s essential to consider your individual financial situation before making any decisions. If you’re already having trouble making ends meet, you may not need the extra money, and it’s better to prioritize other expenses. On the other hand, if you have the free cash flow to contribute the maximum amount, you can leave the excess for heirs.
As a reminder, there’s also a rule change taking effect in 2026 that will impact certain employees making catch-up contributions to Roth-styled retirement accounts offered by their employer.
Source: https://www.investors.com/etfs-and-funds/personal-finance/catch-up-contributions-to-your-401k-can-now-be-supersized