A New Perk of Getting Older:  The “Super Catch-Up” for 401(k) Savings

The perks of getting older include more than just eminent wisdom and senior discounts.  As of January 1, the IRS rolled out a new rule that enables workers aged 60 to 63 to direct more tax-deferred savings to their retirement accounts.  At the end of 2022, Congress enacted significant changes to retirement plan rules as part of an omnibus spending package, known as SECURE Act 2.0.  We wrote a blog article at the time about the relevant changes for our clients and another blog article last January about the changes that went into effect in 2024.  In this new calendar year, one more provision of SECURE Act 2.0 is now being implemented:  the “super catch-up,” allowing additional retirement plan contributions for those aged 60, 61, 62 and 63.

Over the past few decades, the prevalence of pension plans has decreased and reliance on employer retirement plans has increased in providing for living expenses in retirement.  Many older workers may not have had the ability to save enough in the early years of their careers, so this “super catch-up” aims to incentivize those on the brink of retirement to increase their savings.  Especially as many workers are in their peak earning years in their early 60s, the ability to save current-year taxes by deferring more pre-tax income into their retirement plans can be very attractive.

Prior to January 2025, any worker aged 50 and over, who participated in a 401(k), 403(b), or 457 plan, was eligible to make a $7,500 catch-up contribution in addition to the annual contribution limit of $23,000.  This year, the annual contribution limit increases to $23,500 (since it is indexed to inflation) and the normal catch-up contribution limit remains at $7,500, so most participants 50 and older can contribute up to $31,000 to their retirement plans.  Under the change in SECURE Act 2.0, however, participants aged 60 through 63 have a higher catch-up limit, which is equal to the greater of $10,000 or 150% of the normal catch-up contribution limit.  For 2025, this means that the “super catch-up” is $11,250, as shown in the table below.  (Note that if you attain age 50 or age 60 at any time during the calendar year, you are eligible for the increased catch-up provisions.)

One other SECURE Act 2.0 provision, which impacts retirement plan savings, is still yet to be implemented.  SECURE Act 2.0 originally mandated that, starting in 2024, any catch-up contributions to 401(k), 403(b), or 457(b) accounts for high income employees (earning wages over $145k from the same employer in the previous calendar year) would have to be made to the Roth version of their retirement plan.  If a Roth version of the retirement plan was not available, then no one would be allowed to make any type of catch-up contributions to that plan.  However, given the amount of logistics required for employers to adapt to this change, the IRS decided to delay implementation of this provision until 2026.

If you have any questions about how these changes impact your financial plan, please call or email us any time.