Major retirement savings changes coming in 2025

HUNTSVILLE, Ala. (WAFF) – The SECURE Act 2.0, passed in 2022, aims to help Americans bolster their retirement savings. Some of the most impactful changes are set to take effect in 2025. These new provisions primarily focus on expanding 401(k) accessibility and increasing contributions for workers approaching retirement age. Financial expert Jay McGowan from The Welch Group breaks down what these changes mean for employees and their retirement plans.

Automatic 401(k) Enrollment

One of the most notable changes in the SECURE Act 2.0 is the requirement for automatic enrollment in 401(k) plans for newly established plans. Starting in 2025, employers who create 401(k) plans after December 29, 2022, must automatically enroll eligible employees.

Here’s how it works:

• Enrollment Contributions: Employees will be enrolled at a contribution rate of at least 3%, but not more than 10% of their salary. The rate will increase by 1% annually until it reaches a minimum of 10%, with a cap of 15%.
• Opt-Out Option: Employees can opt out of the automatic enrollment.
• Exceptions: Certain employers are exempt from this requirement, including those with fewer than ten employees, businesses under three years old, SIMPLE 401(k) plans, and governmental or church plans.

Increased Catch-Up Contributions

For older employees looking to boost their retirement savings, the SECURE Act 2.0 introduces higher catch-up contributions for workers aged 60 to 63.

Here’s what to expect:

• Age 50-59: The current catch-up contribution limit remains unchanged at $7,500 for 2025.
• Age 60-63: Individuals in this age group can contribute over $10,000 or 150% of the regular catch-up amount. For 2025, that would mean a contribution limit of $11,250, provided the plan offers this option.

Long-Term Part-Time Employee 401(k) Eligibility

The SECURE Act 2.0 also improves retirement plan access for part-time workers. Beginning in 2025, long-term part-time employees who work at least 500 hours per year for two consecutive 12-month periods and are 21 or older by the end of the second 12-month period will be eligible to participate in their employer’s 401(k) plan.

What These Changes Mean

These updates aim to make retirement savings more accessible and to encourage higher savings rates as workers approach retirement age. Automatic enrollment is expected to drive participation, while increased contribution limits for older employees offer a valuable opportunity to boost retirement funds in the final working years.

As 2025 approaches, it’s crucial for employees to review their retirement plans and consider how these changes might impact their savings strategy. Employers should also prepare to update their retirement plan offerings to comply with the new regulations. For more information, consult a financial advisor or your company’s HR department.

To learn more about The Welch Group, click here.

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