Retirement Plans Will Look Different in 2025: What You Need to Know

SECURE 2.0 will continue to reshape the retirement savings space in 2025 and for years to come. Deemerwha studio/Shutterstock

The way you save for retirement may take new shape in 2025—and for the better.

That’s because major provisions in the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act—a sweeping piece of legislation designed to improve the retirement savings system—will go into effect next year.

These include a boost to catch-up contributions for Americans of a certain age cohort and an ease on 401(k) eligibility requirements for part-time workers.

But it’s also important to brush up on important changes that recently went into effect thanks to SECURE 2.0.

The legislation has many moving parts, with some provisions set to become official even after 2025.

But keep in mind that contribution limits and other thresholds can change depending on IRS announcements.

Catch-Up Contributions

Each year, the IRS sets 401(k) and 403(b) contribution limits. For 2025, the standard contribution limit for 401(k) and 403(b) plans is $23,500.

However, “catch-up” contributions are designed to help older workers sock away more money as they get closer to retirement.

And in 2025, workers aged 50 and older can make catch-up contributions of up to $7,500 for a total of $31,000 ($23,500 + $7,500).

But the real game-changer for the new year is the special catch-up contribution allowed for employees between the ages of 60 and 63. These individuals would be able to make catch-up contributions worth the higher of $10,000 or 150 percent of the standard catch-up contribution. This means that people between the ages of 60 and 63 could potentially contribute up to a total of $34,750 ($23,500 + $11,250) to their 401(k) or 403(b) plans.

Assuming a return rate of 10 percent per year, that sum could turn to $90,132.55 in 10 years. And that’s if you don’t contribute any more in that decade.

Easier Access to 401(k)s

Part-time workers may participate in their companies’ 401(k) plans for the first time in 2025.

That’s because after Dec. 31, employees can enroll in their company’s 401(k) plan if they are at least 21 years old and work at least 500 hours per year with the company for at least two consecutive years.

Companies would look at service dating back to Jan. 1, 2023, for these qualifications.

Auto-Enrollment

Beginning in 2025, 401(k) and 403(b) plans created after Dec. 29, 2022, would be required to automatically enroll eligible employees.

These workers would be enrolled at a default contribution rate of between 3 percent and 10 percent of their compensation. The rate is set to increase at 1 percent annually until at least 10 percent but not more than 15 percent.

Employees can opt out of these plans and change contribution levels.

Should You Take Your RMD?

An important update to the required minimum distributions (RMDs) from individual retirement accounts (IRAs) is already in effect. But it may affect you for the first time in 2025.

This is because when you reach age 73, you generally need to begin taking RMDs from your traditional IRA and 401(k) or face a tax penalty. And you’d need to continue taking RMDs each year after.

You can calculate your RMD amount by dividing your IRA’s value by a life expectancy factor determined by the IRS.

But keep in mind that you need to do this for each of your accounts within the same group. You may take the total RMD amount from one traditional IRA or combine it across all your traditional IRAs. The same rule would apply to your 401(k)s.

You have until April 1 after the year you turn 73 to take your first RMD or you’ll face a penalty equal to 25 percent of your RMD amount. The penalty, which was reduced by SECURE 2.0, applies to every time you miss an RMD.

And you should also note that the RMD age is set to increase to 75 in 2033.

Emergency Savings Accounts

Since 2024, employers have been allowed to link an emergency savings account to employees’ defined contribution plans such as 401(k)s.

Employees can contribute up to $2,500 to these savings accounts or a lower amount set by the company.

However, because they are set up as Roth accounts, employees won’t be able to take tax deductions as they would while contributing to a traditional 401(k).

Still, they can withdraw funds tax-free once a month.

And if your company makes matching contributions to your retirement plan such as your 401(k), it’ll match the contributions to your emergency savings account. However, these particular matching contributions would go directly into the retirement plan linked to your emergency savings account.

If your employer offers an emergency savings account, it could help you save money for sudden expenses while protecting your retirement assets.

529 Plans

The SECURE 2.0 Act also allows 529 college savings plan assets to be rolled over into a Roth IRA in the beneficiary’s name after 15 years.

These rollovers are subject to an aggregate lifetime limit of $35,000. And the rollover would count toward the applicable Roth IRA contribution limit. For 2025, the Roth IRA contribution limit is $7,000, or $8,000 if you’re 50 or older.

SECURE 2.0 will continue to reshape the retirement savings space in 2025 and for years to come. It’s important to consult a tax adviser when dealing with complex retirement savings matters.

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