This 2025 Retirement Account Change Could Help Workers in Their 60s Retire Earlier

The average American worker begins saving for retirement around age 28, according to a recent Voya Financial survey, but a majority wish they had started earlier. This is understandable. The sooner you start saving for retirement, the less of your own money you will have to contribute because the more investment earnings you will have.

Many workers reach their 50s and 60s with far less savings than they would like, and some fear their money will last them a lifetime. It’s a valid concern, but a new rule change taking effect next year could make things a little easier for some workers in their 60s.

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Training contributions are being increased

Retirement plans, such as 401(k)s, are available for employees age 50 and over. capture contributions for years. These are additional contributions beyond the annual limit set by the IRS. For example, in 2024, those under 50 can contribute up to $23,000 to a 401(k), while those 50 and older as of Dec. 31 can contribute up to $30,500. These limits will increase to $23,500 and $31,000, respectively, for 2025.

But starting next year, there will be an even higher catch-up contribution limit for adults aged 60, 61, 62 and 63. That catch-up contribution will be $11,250 next year, giving them a total possible 401(k). Contribution of $34,750. This compensation contribution will be indexed to inflation in the coming years.

SIMPLE retirement accountsAdults ages 60 to 63 will also see an increased catch-up contribution next year, available at some businesses with 100 or fewer employees. They will be allowed to set aside up to $5,250 in addition to the standard contribution limit for all SIMPLE plans. participants.

Who will it benefit?

Anyone who will be between the ages of 60 and 63 by December 31, 2025 will be allowed to benefit from these higher catch-up contributions next year. You don’t need to do anything special to request these. Delay money from your paychecks as you normally would.

Of course, this assumes you’ll have extra money to put aside, and that’s not the case for everyone. If you’re behind on your retirement savings because you can’t spare the extra money, you may have to resort to different tactics to get the money you need. This may include:

If none of these strategies work, you may need to consider delaying retirement. It’s not ideal, but it gives you more time to save while reducing the time and cost of retirement. The money you’ve already invested will also have more time to grow.

Finally, keep these new, higher catch-up contributions in mind even if you don’t benefit from them in 2025. If you get a raise in the future, it may allow you to put away more money in future years. Be sure to double-check annual limits each year as they will increase over time.