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Coming attraction: Supersize 401k contributions

For those who failed to save for their retirement early in their careers, the tax code has long permitted age-based “catch-up” contributions to IRAs and 401(k). The SECURE Act 2.0 established an even bigger 401(k) catch-up for those who are 60, 61, 62, and 63, a bonus contribution of $3,750. The change takes effect in 2025.

The table below shows the age-based 401(k) contribution limits for 2025 after inflation is taken into account.

2025 401(k) contribution limits

Age at year-end	2024 limit	2025 limit	Increase
Under 50	$23,000	$23,500	$500
50 – 59	$30,500	$31,000	$500
60 – 63	$30,500	$34,750	$4,250
64 and older	$30,500	$31,000	$500

Source: IR 2024-285

The supersized limit does not apply to IRAs. The 2025 limit for deductible IRA contributions will be $7,000, with a catch-up allowance of $1,000 for taxpayers 50 and older. The IRA catch-up will be indexed for inflation in the future.

Although the added incentive to boost savings just before retirement begins is welcome, it’s not something to rely upon. Putting more money into a 401(k) plan early in one’s career, starting in one’s 30s or ever 40s, will do far more for retirement security than larger contributions late in the earning years. Earlier contributions have the benefit of many more years of compounding growth.

(November 2024)

Investment and insurance products are:
• Not FDIC insured
• Not insured by any federal government agency
• Not a deposit or other obligation of, or guaranteed by, Centier Bank
• Subject to investment risks, including possible loss of the principal amount invested