Older Workers Can Now Supersize Their 401(k) Savings

The super catch-up rule allows workers aged 60 to 63 to contribute even more to their 401(k) plans, on top of the regular contribution limits. This new provision, part of the Secure 2.0 Act that Congress passed in late 2022, takes effect in 2025. The super catch-up contributions are meant to help older workers significantly boost their retirement funds at a critical point in their savings journey.

Currently, individuals aged 50 and older can take advantage of the standard catch-up contribution, which allows them to put an extra $7,500 into their 401(k) accounts beyond the regular annual limit. In 2024, the annual 401(k) contribution limit is set to increase to $23,000, and workers aged 50 or older can add the catch-up contribution to reach a total of $30,500. However, the super catch-up will provide an additional boost for individuals aged 60 to 63, allowing them to put even more into their retirement savings.

In 2025, those in the 60-63 age bracket will be able to contribute the greater of $10,000 or 150% of the standard catch-up contribution amount. This means that, potentially, eligible workers could be contributing thousands more during these four pivotal years. After age 63, the regular catch-up contributions still apply.

For older workers, this new rule presents a golden opportunity to play catch-up if they haven’t saved as much as they’d like. Life has a way of getting in the way of saving for retirement—raising kids, paying for college, buying a home, and dealing with unexpected expenses can leave many workers feeling like they’re behind on their savings. The super catch-up rule aims to help close that gap by allowing higher contributions during what is often a peak earning period.

Moreover, the ability to supersize retirement contributions provides a tax advantage. All contributions to traditional 401(k) accounts are tax-deferred, meaning you won’t pay income tax on these funds until you withdraw them in retirement. If you’re earning more income in your 60s, making these extra contributions can help lower your taxable income now, while giving a big boost to your future retirement income.

The super catch-up rule is designed to benefit those nearing retirement, particularly if they’ve found themselves with fewer savings than they’d hoped for. Workers in their 60s who are in a strong financial position to save more should definitely consider maximizing this opportunity.

This provision is also helpful for folks who may have delayed saving for retirement. Maybe you were focused on paying down debt, financing your kids' education, or perhaps the economic downturns made it tough to save consistently. Now, with more disposable income and a shorter time horizon to retirement, maximizing your 401(k) contributions—especially with the super catch-up option—can help you make significant progress toward a comfortable retirement.

If you are in a high tax bracket, taking advantage of the super catch-up contribution can be particularly beneficial. The extra savings will lower your current taxable income, providing you with immediate tax relief while securing your future financial comfort.

If you’re eligible and want to take advantage of the super catch-up, it’s important to start planning now. Here’s how you can get started:

1. Check Your Current Savings Rate: Review how much you are currently contributing to your 401(k) plan. If you’re not already contributing the maximum allowable amount, make a plan to gradually increase your contributions.
2. Consult with Your Allworth Financial Advisor: Determining the right amount to contribute requires careful planning, especially as you consider your broader financial situation, including any other investments or savings you might have. Your Allworth advisor can help you understand how these additional contributions fit into your overall retirement strategy.
3. Budget for Increased Contributions: If you’re planning to take advantage of the super catch-up contributions in 2025, it’s smart to start budgeting now. You may need to adjust your spending in order to put more money into your 401(k). The sooner you start adjusting your budget, the easier it will be to meet your contribution goals.
4. Monitor Plan Limits and Adjust Accordingly: Retirement plan contribution limits change every year to keep pace with inflation. Make sure to stay informed about these changes so you can adjust your contributions as needed. For 2025, you’ll want to take full advantage of the new super catch-up contribution limits.
5. Maximize Employer Contributions: If your employer offers a matching contribution, ensure you’re contributing enough to receive the full match. Employer matching is essentially free money and can significantly enhance your retirement savings. Combining employer matches with the super catch-up contribution can provide a powerful boost to your overall savings.

The new super catch-up contribution presents a rare chance to add significant value to your retirement plan—but only if you take advantage of it. Remember, these extra contributions are available only to workers aged 60-63, which means the window is narrow. Starting early and being proactive will ensure you don’t miss out.

At Allworth Financial, we understand how important it is to make the most of your retirement savings opportunities. Whether you’re still in the accumulation phase or getting close to retirement, our advisors are here to help you navigate these new changes to ensure you’re on track to reach your goals.

The super catch-up contribution is just one of the tools that can help you enhance your retirement security. Let us help you make sense of how it fits into your overall financial picture and create a strategy that works for you. Contact your Allworth advisor today to learn more about the new contribution limits and how to take full advantage of them.

Together, let’s make sure your retirement years are as comfortable and fulfilling as possible, with a plan that makes the most of every opportunity available to you.