We have all heard about the power of compound interest and the importance of saving for retirement when you are young. For many people, the more immediate dreams of home ownership, children, travel and/or (fill in the blank for your dream) leave saving for retirement out of reach or just out of mind.
With the rise in 401(k) Profit Sharing plans and more reliance on retirement savings in order to have a secure retirement, catch-up contributions were added into law back in 2001. These are employee contributions that allow participants over the age of 50 to defer in excess of the annual 401(k) salary deferral limit. The idea being that those of us who have made it to age 50 are seriously considering retirement in the not as distant future as when we were younger. To make up for the fact that we *may* have not saved enough in our younger years, we get to contribute more to make up for the shortfall.
In 2024, the catch-up limit for 401(k) plans was $7,500. So participants over age 50 can defer up to $30,000 from their salary into their 401(k) plan in 2025.
Thanks to the SECURE 2.0 Act, starting in 2025, the catch-up limit has been increased for participants between the ages of 60 and 63. The table below shows what the 2025 deferral limits are based on a participant’s age.
| Age | Deferral Limit including catch-up |
| < 50 | $23,500 |
| 50-59 | $31,000 ($23,500 + $7,500) |
| 60-63 | $34,750 ($23,500 + $11,250) |
| >= 64 | $31,000 ($23,500 + $7,500) |
The SECURE 2.0 Act also affects the tax deductibility of catch-up contributions. The law requires all catch-up contributions to be Roth contributions for employees making over $145,000 per year (adjusted for inflation). There are a lot of questions about the implementation of that particular provision so it has been delayed until 2026 while the details are being figured out.
