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In case you’re an older investor and keen to avoid wasting extra for retirement, there is a massive 401(ok) change for 2025 that might assist increase your portfolio, consultants say.
Individuals anticipate they may want $1.26 million to retire comfortably, and greater than half anticipate to survive their financial savings, in line with a Northwestern Mutual survey, which polled greater than 4,600 adults in January.
However beginning this yr, some older staff can leverage a 401(ok) “tremendous funding” alternative to assist them catch up, Tommy Lucas, a licensed monetary planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, beforehand informed CNBC.
Here is what traders must learn about this new 401(ok) function for 2025.
Larger ‘catch-up contributions’
For 2025, you possibly can defer as much as $23,500 into your 401(ok), plus an additional $7,500 in the event you’re age 50 and older, often called “catch-up contributions.”
Due to Safe 2.0, the 401(ok) catch-up restrict has jumped to $11,250 for staff age 60 to 63 in 2025. That brings the max deferral restrict to $34,750 for these traders.
Here is the 2025 catch-up restrict by age:
- 50-59: $7,500
- 60-63: $11,250
- 64-plus: $7,500
Nevertheless, 3% of retirement plans have not added the function for 2025, in line with Constancy information. For these plans, catch-up contributions will robotically cease as soon as deferrals attain $7,500, the corporate informed CNBC.
In fact, many staff cannot afford to max out 401(ok) worker deferrals or make catch-up contributions, consultants say.
For plans providing catch-up contributions, solely 15% of staff participated in 2023, in line with the most recent information from Vanguard’s How America Saves report.
‘An amazing device within the toolbox’
The upper 401(ok) catch-up is “a terrific device within the toolbox,” particularly for larger earners on the lookout for a tax deduction, mentioned Dan Galli, a CFP and proprietor of Daniel J. Galli & Associates in Norwell, Massachusetts.
Whereas pretax 401(ok) contributions provide an up-front tax break, you may owe common revenue taxes on withdrawals, relying in your future tax bracket.

Nevertheless, your eligibility for larger 401(ok) catch-up contributions hinges what age you may be on Dec. 31, Galli defined.
For instance, in the event you’re age 59 early in 2025 and switch 60 in December, you can also make the catch-up, he mentioned. Conversely, you possibly can’t make the contribution in the event you’re 63 now and shall be 64 by year-end.
On high of 401(ok) catch-up contributions, massive savers may additionally take into account after-tax deferrals, which is one other lesser-known function. However solely 22% of employer plans provided the function in 2023, in line with the Vanguard report.