Catch-up contributions are additional amounts that individuals aged 50 and older can contribute to their retirement accounts beyond the standard annual limits. For 2025, the standard annual deferral limit for 401(k), 403(b) and 457 plans are $23,500. The catch-up contribution limit for those aged 50 and older is $7,500 for a total of $31,000.
However, beginning in 2025, legislation known as The Secure Act 2.0 allows active participants in these plans, aged 60 to 63, to make a “super catch-up" contribution of $11,250 for a total deferral limit of $34,750. Once these participants turn age 64, the catch-up deferral limit returns to the standard amount.
The participant must be maximizing the annual deferral and catch-up contribution limits to take advantage and benefit from the “super catch-up” increase. This increase provides a great opportunity for older workers to accelerate their savings at a point in their life when they have fewer expenses like mortgages, car payments and other debt obligations.
The adoption of the “super catch-up” provision is not mandatory, so talk to your employer’s plan administrator to verify its availability.
Another notable change ushered in by the SECURE 2.0 Act is the requirement that catch-up contributions for those making $145,000 or more (adjusted for inflation) in the previous year be made as Roth contributions. Whether you view this new provision as a benefit or not depends on your need or desire for a tax break today, or in the future. Roth contributions are made on an after-tax basis. If you follow the rules, all withdrawals from a Roth account are tax-free. If you believe taxes will be higher in the future, you may want to pay taxes at today’s rates to save in the future.
Increased savings and investment opportunities like these underscores the need for individuals to do more in preparation for their retirement. The ability to accelerate catch-up contributions in both pre-tax and Roth buckets provides a great opportunity to strengthen your retirement and tax plan.
This article was written by Sal D’Angelo, Founder and President of LakePointe Advisors LLC, a fee-based investment advisory firm specializing in retirement, tax and estate planning. LakePointe Advisors is located in Mentor, Ohio and serves all of Northeast Ohio and surrounding communities.
Advisory services offered through Fourth Dimension Wealth, LLC, a Registered Investment Advisor. Fourth Dimension Wealth, LLC and LakePointe Advisors, LLC are separate entities.
The information presented in this newsletter is the opinion of LakePointe Advisors, LLC and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but no liability is accepted for any inaccuracies. This is for informational purposes and should not be construed as an investment recommendation. Past performance is no guarantee of future performance. Fourth Dimension Wealth, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission.
The information contained in this article is not intended to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. All investments come with a risk of loss.
We are not giving tax, legal or accounting advice. Each investor’s situation is unique so please work with a professional financial adviser, tax accountant or legal representative, as applicable, to develop an individualized plan or address any questions you may have.
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