The new year brings some changes to 401 (k) plans across the country, including an expanded limit on catch-up contributions older workers can make. The larger contributions can lower the amount of taxable income for individuals who are eligible and take advantage.

What You Need To Know

  • The contribution cap for all employees is $23,500 in 2025, a $500 increase from last year

  • Employees over the age of 50 have a chance to make additional catch-up contributions of up to $7,500

  • Beginning in January, workers between the ages of 60 and 63 before Dec. 31, 2025, can make a catch-up contribution of up to $11,250

The contribution cap this year for all employees is $23,500, a $500 increase over last year’s cap.

Older employees, generally over the age of 50, have the chance to make catch-up contributions to offset years of inadequate savings. Starting this month, workers between the ages of 60 and 63 can contribute a total of $37,750 to their 401 (k) plans, which includes a catch-up contribution of up to $11,250.

That’s nearly $4,000 more than the standard, and it all stems from the Setting Every Community Up for Retirement Enhancement Act that Congress passed in 2022 to improve savings opportunities for Americans.

It’s the largest increase in nearly two decades, so experts are encouraging older investors to take advantage.

“I think it’s huge,” Dopkins Wealth Management Senior Wealth Advisor Bob Canterbury said. “Don’t forget that 401 (k) continues to grow even after you retire, so maybe you’re not contributing anymore, but the dollar is in there.”

That isn’t the only change happening with 401 (k) plans in 2025. There is a new auto enrollment requirement. Employers must enroll all qualified employees at a minimum 3% contribution rate with corresponding increases of 1% in each subsequent year until reaching 10%.

There are some exemptions for smaller businesses with a staff of 10 or less, and plans that were established before December 2022. Churches and government retirement plans are also exempt. Employees can opt out, but the idea is to encourage more workers to participate.

“The vast majority of people who are auto-enrolled just keep it that way. They don’t change it, they don’t shut it off, they don’t reduce it,” Canterbury said. “I think it’s going to work in the long run that those folks will have balances in there and in many cases, they will be receiving company match on contributions that otherwise might not have been put into the plan."

Experts also encourage investors to look at their 401 (k) accounts once or twice a year to make sure they’re working for you. More information can be found on the Internal Revenue Service’s website.