A new year brings fresh opportunities in retirement planning, and 2025 introduces meaningful changes for retirement savers, particularly those in their peak earning years. In particular, the IRS just gave some of us more room to save in our workplace retirement plans.
Supersize Catch-Up Provision
The headline change? A new “supersize” catch-up provision for ages 60-63 increases the standard catch-up amount from $7,500 to $11,250. On top of that, phase-out ranges (income limits for contributions) for IRA contributions have also increased.
This four-year window, combined with increased phase-out ranges, creates some potentially lucrative ways to increase your tax-advantaged investing opportunities. Let’s break down these changes and examine how they could affect your retirement savings strategy.
2025 Contribution Limit Changes
Starting January 1, 2025, several notable adjustments will take effect:
| Tax Filing Status | Old Range | New Range |
|---|---|---|
Single Taxpayers Covered by a Workplace Retirement Plan |
$77,000 - $87,000 |
$79,000 - $89,000 |
Married Couples Filing Jointly (Spouse Making Contribution Covered by a Workplace Retirement Plan) |
$123,000 - $143,000 |
$126,000 - $146,000 |
| Tax Filing Status | Old Range | New Range |
|---|---|---|
Singles and Heads of Household |
$146,000 - $161,000 |
$150,000 - $165,000 |
Married Couples Filing Jointly |
$230,000 - $240,000 |
$236,000 - $246,000 |
| Contribution Type | 2025 Limit |
|---|---|
|
Standard Contribution
401(k), 403(b) plans
|
$23,500
+$500 from 2024
|
|
Standard Catch-Up (Age 50+)
Additional contribution allowed
|
$7,500
Same as 2024
|
|
Super Catch-Up (Ages 60-63)
Replaces standard catch-up amount
|
$11,250
New for 2025
|
|
Maximum Total (Ages 60-63)
Base + Super catch-up combined
|
$34,750
Highest possible contribution
|
This brings the maximum possible contribution for those aged 60-63 to $34,750 ($23,500 base + $11,250 super catch-up). Compared to the regular catch-up limit of $7,500, this provides an additional $3,750 in catch-up contribution space during these peak earning years.
Long-Term Impact Analysis
Let’s put some real numbers behind these strategies. We’ve run calculations using three different scenarios, assuming a 6% annual return. While past performance never guarantees future results, this gives us a reasonable framework for comparison. Here’s how the numbers could play out if you start maximizing contributions at age 50 and retires at age 65. We’ll assume a 6% annual return with monthly contributions from age 50 to 65, then no contributions thereafter.
That four-year supersize window makes a real difference – by age 87, it adds nearly $70,000 compared to standard catch-up contributions. Meanwhile, the total difference between no catch-up and the supersize strategy reaches about $845,000. That’s some meaningful retirement income!
| Retirement Age | No Catch-Up Contributions | With Standard Catch-Up | With Super Catch-Up | Additional Wealth from Super Catch-Up |
|---|---|---|---|---|
Age 67 |
$648,375 |
$855,304 |
$875,737 |
$20,433 over standard catch-up |
Age 77 |
$1,179,652 |
$1,556,137 |
$1,593,313 |
$37,176 over standard catch-up |
Age 87 |
$2,146,255 |
$2,831,230 |
$2,898,869 |
$67,639 over standard catch-up |
This analysis and visual element are for educational purposes only and is not meant to be professional advice. Your situation and analysis will differ, and you should always seek professional advice.
Tax Considerations
Let’s talk taxes for a moment. While higher limits mean a potential boost to your savings, they also mean greater flexibility in regard to your tax situation, as traditional contributions are deducted from your taxable salary; higher limits mean higher deductions and a reduced overall tax burden. Alternatively, if you decide to make Roth contributions, that’s potentially more tax-free money down the road.
In Conclusion
Now is a great time to think about your retirement contributions. These new limits for 2025 could open up more opportunities to save, and we’re here to help you make the most of them. We can walk through your maximum contributions, adjust payroll deductions, and ensure everything lines up with your broader retirement goals.
For those approaching ages 60-63, this is an especially unique chance to boost your savings during peak earning years. Reach out to us, and let’s talk about how these updates can work in your favor and create a stronger plan for your future.
