Smart Planning Ideas for 2025 Retirement Plan Changes

If you’re at least 50 years old, you can make extra contributions to your retirement plan. And if you’re between 60 and 63 years old, you can contribute even more.

Recent law changes have made it easier for those approaching retirement to build up their retirement savings before their coworkers start hanging the “You’re Retired” banner in their offices. Let’s catch up on what’s new and how high earners who are at least 50 years old can take advantage.

Additional Catch-Up Contributions for 60–63-Year-Olds

Employees can generally contribute up to $23,500 to their 401(k), 403(b), and 457(b) plans in 2025. Those who reach at least 50 years old in 2025 can invest an additional $7,500, for a total contribution of $31,000.

Thanks to a recent tax law change, the catch-up contribution gets even better for certain employees starting in 2025. Employees who turn 60, 61, 62, or 63 during the year can make catch-up contributions of up to $11,250, for a total of $34,750 in 2025.

Those aged 60–63 with SIMPLE plans can take advantage of the greater catch-up amount, too. Here’s a quick summary of the contribution maximums by age and plan type:

Planning opportunity: Those turning 60–63 in 2025 are in the first tranche of workers with access to the supercharged catch-up contribution. Because the heightened catch-up limit goes away once a worker reaches age 64, it may be worth exploiting the additional tax-advantaged savings opportunity while it’s available.

Mandatory Roth Catch-Up Contributions for High Wage Earners

The legislation known as SECURE 2.0, passed in 2022, required that catch-up contributions by high wage earnershad to be designated Roth. As a reminder, Roth retirement contributions are made post-tax, but they enjoy tax-free growth and withdrawals in retirement if certain conditions are met.

The provision was set to go into effect in 2025, but the IRS has since allowed employers to delay implementing the rule until 2026 or 2027. In 2025, an employee is a high wage earner when they make more than $145,000. Insight: That $145,000 figure, which is adjusted for inflation each year, applies only to the employee’s income from the employer, not income from a second job, spouse, or investments.

Planning opportunity: Employees who have some control over the timing of their income might try to avoid tipping their pay over the compensation threshold to give themselves more options. Also, in the final year or two before employers start adopting the mandatory Roth rule, high wage earnershave one last chance to choose whether to designate their contributions as traditional (pre-tax) or Roth (post-tax). Knowing that catch-up contributions must be Roth after this point, pre-tax contributions might be a more attractive choice than previously thought. Going forward, high-income individuals may want to consider whether it makes more sense to prioritize savings in other areas, such as health savings accounts or taxable brokerage accounts, that may provide more tax advantages or flexibility.

Keep in mind that the law affects only the nature of catch-up contributions, not regular retirement contributions. Deciding whether to make traditional or Roth retirement contributions (or a combination of both) depends on several factors, including the current makeup of the retirement savings portfolio, income levels during employment versus retirement, its potential effect on Medicare premiums, and more. An advisor can help determine the best approach to saving for retirement given these new rules. S+HWM: Your Retirement Planning Partners

Smith + Howard Wealth Management specializes in helping high-net-worth individuals and families prepare for life’s journeys, including retirement. As retirement plan rules change for those in their critical retirement savings years — 50 years old and above — it’s essential to consider the planning opportunities that arise.

Contact an advisor for a personalized review of your retirement portfolio to learn how you can optimize your retirement plan in light of the changing legislation.