Saving for retirement is important, but many people find it difficult to save enough. The two main ways to save are starting early or saving more as you get closer to retirement. For older adults, the Internal Revenue Service (IRS) has introduced new rules to make saving easier.
These changes aim to help people over 60 save more, as they typically earn more and have less debt. This article explains these changes and how they can help you save for a better retirement.
Why Retirement Savings Are Important
Many people face challenges when saving for retirement. Younger workers often deal with lower salaries and debts, which can make saving seem impossible. However, saving for retirement early on can lead to a more secure future.
Unfortunately, a report by Vanguard, How America Saves, shows that only 14% of employees take full advantage of workplace retirement plans. This means that many people are missing out on opportunities to save more.
Changes to IRS Retirement Savings Rules
The IRS has introduced new rules to help older adults save more for retirement. These changes affect workplace retirement plans like 401(k)s, 403(b)s, and government plans like the 457 plans and the federal Thrift Savings Plan.
Higher Contribution Limits for 2025
In 2025, the contribution limits for these plans will increase. The maximum employee contribution will rise from $23,000 to $23,500.
This will allow people to save a little more each year. However, the most significant change affects people aged 60 to 63. They will be able to make larger contributions through a “super catch-up contribution.”
Super Catch-Up Contribution
People aged 60 to 63 can contribute up to $11,250 in addition to the regular $23,500 limit, totaling $34,750. This higher limit will help those nearing retirement save more quickly.
However, Richard Pon, a CPA, advises that people aged 64 and older will no longer qualify for the super catch-up contribution. After turning 64, only the regular catch-up contribution of $7,500 will be available.
Other IRS Changes for 2025
The IRS has also increased the income limits for people contributing to IRAs. For example, single taxpayers with a workplace retirement plan can contribute to an IRA if their income is between $79,000 and $89,000.
Married couples filing jointly can contribute if their income is between $126,000 and $146,000.
Additionally, the income phase-out range for Roth IRA contributions has increased. Single taxpayers can contribute to a Roth IRA if their income is between $150,000 and $165,000, while married couples filing jointly can contribute if their income is between $236,000 and $246,000.
Lastly, the income limit for the Saver’s Credit, which helps low- and moderate-income workers save for retirement, has been raised to $79,000 for married couples filing jointly.
The IRS changes for 2025 will help many people save more for retirement. The increased contribution limits and expanded income ranges make it easier for people to put money aside for their future.
For those aged 60 to 63, the super catch-up contribution is a great way to save more in a shorter time. It’s important to stay informed about these changes to make smarter decisions and build a stronger retirement fund.
What is the catch-up contribution?
The catch-up contribution allows people aged 50 and older to contribute more money to their retirement accounts. For those aged 60 to 63, there is a higher limit, known as the “super catch-up contribution.
Can I contribute more to my retirement if I am over 60?
Yes, if you are between 60 and 63, you can contribute up to $34,750 to your retirement account in 2025. This includes both the regular contribution and the “super catch-up contribution.”
What happens when I turn 64?
After age 64, you can no longer use the “super catch-up contribution.” You can only contribute the regular catch-up amount, which is $7,500.
Are there any changes to Roth IRA contributions?
Yes, the income ranges for Roth IRA contributions have increased. Single taxpayers can contribute if their income is between $150,000 and $165,000, while married couples filing jointly can contribute if their income is between $236,000 and $246,000.
What is the Saver’s Credit?
The Saver’s Credit helps low- and moderate-income people save for retirement. For married couples filing jointly, the income limit for this credit has increased to $79,000 in 2025.
