Are you behind on your retirement saving?

It’s best to start saving for retirement as early as possible. When you’re young and time is on your side, even small contributions from each paycheck can add up over the years. However, many workers wait until they’re older and earning more to focus on their retirement saving goals.

If you’re one of the many investors trying to make up for lost time, the SECURE 2.0 federal tax law (passed in 2022) is here to help.

Starting this year, employer-sponsored retirement plans have the option to offer a higher catch-up contribution for employees in their early 60s. This enhanced catch-up contribution limit is $10,000 or 150% of the standard age 50+ catch-up contribution limit, whichever is greater.

Here’s how that math works for 2025:

• The standard age 50+ catch-up contribution limit is $7,500.
• 150% of $7,500 is $11,250.

This means that employees between the ages of 60 and 63 can contribute an additional $11,250 to their 401(k), on top of the regular IRS contribution limit of $23,500 for 2025. In total, if you’re eligible for this “super catch-up” contribution, you could potentially invest as much as $34,750 in your 401(k) this year.

Make the most of your retirement-saving opportunity

Whether you can afford to max out this higher contribution limit or not, the following tips will help you make the most of the years remaining until you retire.

• Meet the match – If your retirement plan offers a company match, be sure to contribute enough to receive the maximum contribution. Your employer is offering help you save for retirement — don’t say “no” to free money!
• Increase your contribution rate each year* – Try to add a percentage or two (or more) to the amount you contribute from your paycheck each year. If you’re making before-tax contributions, you’ll actually be lowering your taxable income in the process, which saves you money now while you’re saving up for the future.
• Use online calculators – It’s important to have a sense of your retirement saving goal so you can tell if you’re on track or not. Use an online calculator (your retirement plan’s website probably has one) to calculate how much you may need to have saved by the time you retire.
• Check your investment strategy – As tempting as it may be to invest aggressively in the years remaining until retirement, you want to match your investment strategy to your risk tolerance and time horizon until retirement. On the other hand, don’t get too conservative with all of your money. You could spend 20 to 30 years in retirement, so you need a strategy with enough growth potential to help ensure you don’t outlive your savings. If your retirement plan offers target date funds, these all-in-one portfolios offer an easy way to keep your investment strategy aligned with your retirement timeframe.

^*Up to annual plan and IRS limits.

Sources:
“10 Strategies to Maximize Your 401(k) Balance,” by Kate Stalter, U.S. News & World Report, May 28, 2024
“Have You Checked Your 401(k) Balance Lately?” by Adam Shell, Kiplinger’s Personal Finance, 2024
“Older Workers to Get ‘Super’ 401(k) Catch-Up Contributions in 2025,” by Ann Carrns, The New York Times Company, 2024