Big retirement rule changes are coming in 2025 — here’s how you can save more money

Many Americans haven’t saved enough for retirement. However, a big change to 401(k) plans could provide a boost for older workers. The IRS in November unveiled higher 401(k) contribution limits for 2025, with employee deferrals jumping to $23,500, up from $23,000 in 2024. While the catch-up contribution remains unchanged at $7,500 for investors age 50 and older, workers age 60 to 63 can save even more, thanks to changes enacted via Secure 2.0. Starting in 2025, investors age 60 to 63 can make catch-up contributions of up to $11,250 on top of the $23,500 deferral limit. Combined, these workers can defer a total of $34,750 for 2025, which is about 14% higher than 2024. “This can be a great way for people to boost their retirement savings,” certified financial planner Jamie Bosse, senior advisor at CGN Advisors in Manhattan, Kansas, previously told CNBC. Roughly 4 in 10 American workers are behind in retirement planning and savings, primarily due to debt, insufficient income and getting a late start, according to a CNBC survey, which polled roughly 6,700 adults in early August. For 2025, the “defined contribution” limit for 401(k) plans, which includes employee deferrals, company matches, profit-sharing and other deposits, will increase to $70,000, up from $69,000 in 2024, according to the IRS.

How much older workers save for retirement

The 401(k) catch-up contribution change is “very good” for older workers who want to save more for retirement, said Dave Stinnett, Vanguard’s head of strategic retirement consulting. Some 35% of baby boomers feel “significantly behind” in retirement savings, according to a Bankrate survey that polled roughly 2,450 U.S. adults in August. “But not everyone age 50 or older is maxing out [401(k) plans] already,” Stinnett said. Only 14% of employees deferred the maximum amount into 401(k) plans in 2023, according to Vanguard’s 2024 How America Saves report, based on data from 1,500 qualified plans and nearly 5 million participants. The same report found an estimated 15% of workers made catch-up contributions in 2023. Deferral rates for 401(k) plans typically increase with income and age, Vanguard found. Participants under age 25 saved an average of 5.4% of earnings, while workers ages 55 to 64 deferred 8.9%.