Don't Leave Money on the Table: Essential Retirement Account Updates for 2025!

Are you making the most of your retirement savings? Retirement accounts are subject to specific rules and regulations set by the IRS, which frequently change, sometimes with significant updates. A major update that could impact your financial future is unfolding in 2025, thanks to the Secure Act 2.0. This legislation introduced new provisions that are now active and effective, offering new opportunities for savers and employers alike.

Here's what you need to know to ensure you're not leaving money on the table:

Key Retirement Contribution Updates for 2025

1. Increased Standard 401k/403b Deferral Limit

   • For 2025, the standard amount you can contribute from your salary into a 401k, 403b, or similar company-based retirement plan is $23,500. This is an annual update that typically occurs.

2. Expanded Catch-Up Contributions for Older Savers: Introducing the "Super Catch-Up"

   • If you are 50 years or older in 2025 or prior, you are still allowed to contribute an additional catch-up amount, bringing your total potential contribution to $31,000.

   • Brand New "Super Catch-Up" Ages: A significant new change for 2025 introduces additional contribution opportunities for specific age groups:

     • If you attain the age of 60, 61, 62, or 63 in 2025, you are eligible for a "super catch-up" provision.

     • For these four ages, your regular deferrals plus the super catch-up amount can total $34,750 each year.

     • This can make a substantial difference! Just over these four years, with a hypothetical 5% annual return, this could add over $150,000 more to your retirement account. This provision is particularly helpful for those who may need to catch up on retirement savings later in their working years.

New Opportunities for Employers: Including Long-Term Part-Time Employees

For business owners, 2025 also brings an important update for workplace retirement plans, specifically concerning long-term part-time employees.

• Eligibility for Part-Timers: If you have employees who work 500 hours or more per year and have been with your company for two years or more, you can now open up retirement contribution opportunities for them.

• Attraction and Retention Tool: This is a powerful benefit to offer, helping employers attract and retain key talent, even among their part-time workforce. Providing access to retirement plans can be a significant advantage in today's competitive job market.

Your Action Plan

To make the most of these new provisions, consider the following steps:

• Check Your Contribution Rate: Review how much you are currently contributing to your retirement accounts. Do you have room to increase your contributions?

• Bump Up Your Contributions: Even a small increase can make a big difference. Consider raising your contribution rate by just 1%; you likely won't notice it from your paycheck, but your future self will thank you.

• Leverage Your Age: If you fall into the new "magic ages" of 60, 61, 62, or 63, be sure to take advantage of the new super catch-up provisions.

• Employers: Review Your Plan Documents: Ensure your company's retirement plan documents are updated to include these new provisions, especially for long-term part-time employees. Inform your employees about these valuable benefits.

Staying informed about these changes is crucial for maximizing your retirement savings and for employers looking to offer comprehensive benefits.