Starting in 2025, investors aged 60 to 63 will have the opportunity to make catch-up contributions of up to $11,250, in addition to the $23,500 deferral limit. This will allow for a total deferral of $34,750, which is a 14% increase from 2024.

This change is seen as a significant opportunity for individuals to enhance their retirement savings. The IRS has also announced that the defined contribution limit for 401(k) plans will rise to $70,000 in 2025, up from $69,000 in 2024. This increase is particularly beneficial for older workers who are looking to bolster their retirement funds.

However, a Bankrate survey reveals that 35% of baby boomers feel significantly behind in their retirement savings. Data from Vanguard shows that in 2023, only 14% of employees maximized their 401(k) contributions, and only 15% made catch-up contributions. It is worth noting that deferral rates tend to increase with age and income, with workers aged 55 to 64 deferring an average of 8.9% of their earnings, compared to just 5.4% for those under 25.

These upcoming changes in retirement planning may provide a crucial lifeline for many American workers who are looking to improve their financial futures.