The average American worker begins saving for retirement around age 28, according to a recent Voya Financial survey, but the majority wish they’d started earlier. This is understandable. The sooner you begin saving for retirement, the less of your own money you’ll likely have to contribute because you’ll have more investment earnings.

Many workers reach their 50s and 60s with far less savings than they’d like, and some fear they will outlive their money. It’s a valid concern, but a new rule change going into effect next year could make things a little easier for some workers in their 60s.

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Catch-up contributions are getting an upgrade

Retirement plans such as 401(k)s have allowed workers 50 and older to make catch-up contributions for years. These are additional contributions beyond the annual limit set by the IRS. For example, in 2024, those under 50 can contribute up to $23,000 to a 401(k) while those 50 and older by Dec. 31 can contribute up to $30,500. These limits will rise to $23,500 and $31,000, respectively, for 2025.

But starting next year, there’s going to be an even higher catch-up contribution limit for adults aged 60, 61, 62, and 63. This catch-up contribution will be $11,250 next year, which gives them a total possible 401(k) contribution of $34,750. This catch-up contribution will be indexed for inflation in future years.

SIMPLE retirement accounts, available with some businesses with 100 or fewer employees, will also see an increased catch-up contribution next year for adults aged 60 to 63. They will be allowed to set aside up to $5,250 in addition to the standard contribution limit for all SIMPLE plan participants.

Who will it benefit?

Anyone who will be between the ages of 60 and 63 by Dec. 31, 2025, is allowed to take advantage of these higher catch-up contributions next year. You don’t have to do anything special to claim them. Just defer the money from your paychecks as you normally would.

Of course, this assumes you’ll have some extra money to set aside, and that’s not the case for everyone. If you’re behind on your retirement savings because you’re unable to spare the extra cash, you may have to resort to different tactics to get the money you need. This can include:

• Claiming your 401(k) match if you’re eligible for one
• Reviewing your budget and reducing expenses when possible
• Choosing the right time to claim Social Security to maximize your lifetime benefits

If none of these strategies work, you may have to consider delaying retirement. It’s not ideal, but it gives you more time to save while also reducing the length and cost of your retirement. The money you’ve already invested will have more time to grow, too.

Finally, keep in mind these new, higher catch-up contributions even if you don’t take advantage of them in 2025. If you get a raise in the future, that might enable you to set aside more in future years. Just remember to double check the annual limits each year as they will go up over time.

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