Saving for retirement while you're young is a tall order, especially when you're earning a low salary and trying to pay for current expenses. Things can get a bit easier as you age because most people tend to see their salaries rise over time. But then you can run into a new issue.
It's not just your budget that determines how much you can save in retirement accounts. The government gets a say, too. Fortunately, a rule change that took effect this year gives those aged 60 to 63 a little more flexibility to save for their future.
Image source: Getty Images.
There's a new, higher catch-up contribution for adults aged 60 to 63
Retirement accounts, like 401(k)s and IRAs, have annual contribution limits. In 2025, the standard contribution limit for 401(k)s is $23,500, while the limit for IRAs remains at $7,000. These caps apply to all of your accounts of each type. If you put more than the annual contribution limit into your retirement account, you'll face tax penalties until you take the excess out.
For many years, adults 50 and older have been eligible to make what are known as catch-up contributions. These are additional contributions beyond the standard limit. In 2025, the catch-up contribution for 401(k)s is $7,500, and the catch-up contribution for IRAs is $1,000, bringing the total contribution limit for adults 50 and older to $31,000 for 401(k)s and $8,000 for IRAs.
For most people, the 401(k) limit is likely to be sufficient. However, some older workers, particularly those with high incomes who weren't able to set aside as much as they wanted to when they were younger, could still find themselves bumping into that ceiling.
A new 2025 rule change aims to remedy that by adding a new, higher catch-up contribution to 401(k)s and other workplace retirement accounts for those aged 60 to 63. This catch-up limit is $11,250 in 2025, meaning eligible workers can set aside up to $34,750 in their 401(k) this year.
Once you turn 64, you're back to the standard catch-up contribution, so it's worth taking advantage of this higher cap if you can. Even if you already have substantial savings, setting aside a little bit more during these years could help you retire earlier than planned.
How to find the money for more 401(k) contributions
The obvious challenge for most people is finding the cash necessary to pay for more 401(k) contributions. It might be possible to do this by adjusting your budget. However, for some people, this isn't an option.
Consider negotiating a raise or looking for a better-paying position elsewhere if you'd like. But there's more than just salary to weigh. You'll also have to consider the nature of the work, the work environment, and the change in benefits to decide if a switch is the right move for you.
You could also consider starting a side job. You couldn't put money you earned from this work directly into your regular job's 401(k), but you could use it to cover your expenses today. This may enable you to defer a larger portion of each paycheck to your 401(k).
Perhaps you could set a goal to increase your contributions by 1% of your salary each year. Some 401(k) plans allow for auto-escalation, which will do this for you automatically. Check with your employer if you're not sure how to set this up.
Even if you don't ever use any of the new catch-up contributions, it's still worth setting aside whatever you can. You may even be able to get a match for your employer that can help better prepare you for retirement.
