There’s a benefit to saving for retirement in a 401(k) over an IRA. With a 401(k), you get the ability to contribute a much larger sum each year. And if you’re lucky, a workplace match could put more money into your retirement plan.

The contribution limits for 401(k) plans can change from one year to the next. Currently, 401(k)s max out at $23,000 for workers under 50 and $30,500 for those 50 and older, thanks to a $7,500 catch-up.

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That catch-up is staying the same for 2025, but the limit for workers under 50 is rising by $500 to $23,500. All told, those 50 and over will get to contribute up to $31,000 to their 401(k)s next year.

But there’s an exception for workers who will be 60, 61, 62, or 63 in 2025. If you fall into that category, a new rule will make it possible to contribute even more.

Introducing super catch-up contributions

The term “catch-up contribution” can be a bit misleading in the context of a 401(k) because it implies that you’re behind on savings and need to make up for lost time. The ability to make catch-up contributions to a 401(k) doesn’t hinge on your account balance. The only thing that matters is your age. You can have a $7 million 401(k) at age 50 and still be allowed to make a catch-up contribution.

But the reality is that many people do get a late start on retirement savings, and by the time they reach the age of 50, they’re not where they need to be. For people in that boat, catch-up contributions can be a lifeline.

In 2025, the rules of catch-up contributions in 401(k)s are also changing for the better for people between the ages of 60 to 63. If you’re in that boat, your catch-up contribution will increase to $11,250 next year.

To be clear, that’s not in addition to the standard $7,500 catch-up — it’s instead of $7,500. In other words, you can’t contribute an additional $7,500 plus $11,250. Your total allowable 401(k) contribution for the year is $34,750. But as long as you reach age 60, 61, 62, or 63 during the 2025 calendar year, you can take advantage of this change and set yourself up with extra money to spend during your senior years.

An option it pays to capitalize on

As of 2022, the median retirement plan balance among seniors aged 65 to 74 was $200,000, according to the Federal Reserve. While that’s far better than having no savings, it’s not a lot of money over what could be a decades-long retirement.

If your 401(k) balance isn’t as high as you’d like it to be and you’re eligible for a super catch-up contribution, it pays to try to find the extra money next year. The more money you’re able to pump into your 401(k), the more financial options you’ll have once your retirement begins.

Plus, contributions to a traditional 401(k) are made with pre-tax dollars. So you’ll also get the benefit of shielding an even greater portion of your income from the IRS in 2025 by taking advantage of super catch-up contributions.

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