Big 401(k) Changes Coming in 2025: What You Need to Know

As 2025 approaches, significant changes to 401(k) plans are on the horizon, thanks to updates from the SECURE 2.0 Act. These changes can have a major impact on how you plan and save for retirement. From higher contribution limits to improved access for part-time workers, here's everything you need to know to make the most of your retirement plan.

1. Higher Contribution Limits for 401(k)s

Starting in 2025, the annual contribution limit for 401(k) plans will rise to $23,500 for individuals under 50. While a $500 increase may seem small, the power of compounding can turn this into thousands of extra dollars in your retirement savings over time.

2. Enhanced Catch-Up Contributions for Ages 50+

For individuals aged 50 and over, the catch-up contribution limit will increase to $7,500. But if you're aged 60-63, you'll see an even bigger boost—up to $11,250! This change can significantly enhance your retirement savings strategy, but you'll need to ensure your income supports these higher contributions.

Pro Tip: Consult with John White at Financial Guideposts to create a plan that maximizes these benefits. Schedule a call with John here.

3. Automatic Enrollment for New Plans

Starting in 2025, new 401(k) plans established after December 28, 2022, must include automatic enrollment. Employees will be enrolled by default, with contributions ranging from 3% to 10% of their salary, gradually increasing to 15%. While this makes saving easier, it's essential to review your rate to ensure it aligns with your financial goals.

4. Better Access for Part-Time Workers

Good news for part-time employees: You’ll now qualify for a 401(k) plan after just two years of working at least 500 hours per year, down from the previous three-year requirement. This change opens the door for more workers to secure their retirement future.

5. Clarifications on Inherited 401(k)s

Inheriting a 401(k) can be confusing. The IRS has clarified that non-spouse beneficiaries must withdraw funds over 10 years, often requiring annual Required Minimum Distributions (RMDs). This rule means you could face taxes sooner than expected.

Consider Rolling Over: John White can guide you on whether rolling an inherited 401(k) into an IRA could offer better control and tax advantages.

Maximize Your 401(k) with These Tips

Take Advantage of Employer Matches – Free money is hard to beat!
Diversify Investments – Balance your portfolio with stocks, bonds, and other assets.
Review Contributions Regularly – Adjust as your income and life situation change.
Avoid Early Withdrawals – Protect your savings from taxes and penalties.
Roll Over 401(k)s When Changing Jobs – Keep your funds consolidated and managed efficiently.

✅ Talk to John White

Are you ready to get your financial house in order? Schedule a call with John White today! With over 30 years of experience helping families navigate the complexities of financial planning, John brings a wealth of knowledge and genuine care to every consultation.

At Financial Guideposts, we are passionate about guiding you to where you need to be to ensure you and your family live your best, most stress-free life. Our mission is to keep your family financially protected, no matter what happens. Let us help you achieve peace of mind and financial security. Schedule your call with John White now and take the first step toward a brighter financial future.