There are changes coming to your 401(k) in 2025 due to the Secure Act 2.0. (Drew Angerer/Getty … [+]
Significant updates are coming to 401(k) plans in the near future, thanks to the Secure Act 2.0. With several notable provisions going into effect, 2025 will bring new opportunities for individuals to enhance their retirement strategies. As the saying goes, those who fail to plan, plan to fail—so now’s the time to get familiar with what’s changing.
Here’s a rundown of the provisions expected to roll out:
- Super Catch-Up – Beginning in 2025, anyone aged 60, 61, 62, or 63 at the start of the calendar year can contribute the greater of $10,000 or 150% of the regular age-50 catch-up limit.
- Roth Catch-Up Contributions – Starting in 2026, catch-up contributions for employees earning over $145,000 (indexed for inflation) must be made to a Roth 401(k). This gives an extra year to plan for this shift.
- Automatic 401(k) Enrollment – As of 2025, all eligible employees will automatically be enrolled with a 3% deferral into their 401(k). Opting out is allowed, but opting in will no longer be necessary.
- 401(k) Employer Contributions – From 2025 forward, employees can choose to have their employer’s matching contributions allocated to a Roth 401(k), rather than the traditional pre-tax 401(k). However, Roth matches will be taxable at the time of contribution.
- Required Minimum Distributions (RMDs) – The RMD age will increase to 73, and in 2033, it will rise again to 75. This change gives more flexibility for those who reach these ages, allowing them to delay mandatory withdrawals for a bit longer.
- 529 to Roth IRA Conversions – Though not directly related to 401(k)s, this is an important benefit to note. Starting in 2025, up to $35,000 in unused 529 plan funds can be converted into a Roth IRA for the beneficiary, provided certain conditions are met. The 529 account must be open for at least 15 years, and conversions are limited by the annual Roth IRA contribution cap. This means conversions may be spread out over several years, depending on the contribution limit.
Preparing for Changes
As David Bowie’s famous song says, “Cha-cha-cha-changes” are on the horizon, especially in the world of retirement planning. The Secure Act 2.0 introduces some of the most extensive shifts seen in recent years, many of which offer additional flexibility and encourage retirement savings.
These changes are an opportunity to evaluate individual retirement strategies and ensure they’re aligned with new options and limits. Wishing everyone a smooth and prosperous start to 2025.
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