There's a new 'super funding' limit for some 401(k) savers in 2025. Here's who qualifies

CNBC

02-05-2025

If you're an older investor and eager to save more for retirement, there's a big 401(k) change for 2025 that could help boost your portfolio, experts say.
Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January.
But starting this year, some older workers can leverage a 401(k) "super funding" opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC.
Here's a look at other stories impacting the financial advisor business.
Here's what investors need to know about this new 401(k) feature for 2025.
For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you're age 50 and older, known as "catch-up contributions."
Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors.
However, 3% of retirement plans haven't added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC.
Of course, many workers can't afford to max out 401(k) employee deferrals or make catch-up contributions, experts say.
For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard's How America Saves report.
The higher 401(k) catch-up is "a great tool in the toolbox," especially for higher earners looking for a tax deduction, said Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts.
While pretax 401(k) contributions offer an up-front tax break, you'll owe regular income taxes on withdrawals, depending on your future tax bracket.
However, your eligibility for higher 401(k) catch-up contributions hinges what age you'll be on Dec. 31, Galli explained.
For example, if you're age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can't make the contribution if you're 63 now and will be 64 by year-end.
On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report.