Changes to 401(k)s in 2025: Contribution & catch-up limits, mandatory withdrawals and more

Several important changes to 401(k) plans could reshape how workers save for retirement. Thanks to provisions in the SECURE Act 2.0 and new Internal Revenue Service (IRS) guidance, contribution limits are rising, opportunities for late-career savers are available, and automatic enrollment soon will be a standard feature of many new plans.

These updates could help workers save more for retirement and better prepare them for the future. Understanding these changes to 401(k) plans in 2025 can help you make the most of new opportunities to build your retirement savings.

Retirement savers will have more opportunities to boost their 401(k) contributions in 2025. Thanks to annual cost-of-living adjustments and changes under the SECURE 2.0 Act, the maximum amount employees can contribute to a 401(k) plan will increase.

The 401(k) contribution limit increase means employees under age 50 can contribute up to $23,500 starting in 2025, up from $23,000 in 2024. This higher limit applies to employees participating in 401(k) plans, 403(b) plans, most 457 plans and the federal government's Thrift Savings Plan.

For workers 50 years and older, the standard catch-up contribution remains at $7,500 for 2025. When combined with the regular contribution limit, individuals who qualify for the catch-up can contribute up to $31,000 to their 401(k) plan beginning in 2025.

These updated limits give retirement savers the chance to set aside more pre-tax dollars each year, helping to take advantage of tax benefits and the power of compounding growth over time. Even small increases in annual contributions can make a meaningful difference over a long retirement horizon.

• If you're under age 50. You can contribute up to $23,500 to a 401(k) starting in 2025.
• If you're 50 or older. You can contribute up to $31,000, which includes a $7,500 catch-up contribution.
• If you're between the ages of 60 and 63. You can contribute up to $34,750, including an enhanced $11,250 catch-up contribution.

For those who have flexibility in their budget, aiming to contribute the maximum—or at least enough to qualify for any available employer match—can be a powerful strategy to build retirement savings faster. With the new 2025 limits in place, consider revisiting your current contribution elections to ensure they align with your savings goals.

Starting in 2025, workers between the ages of 60 and 63 will have a new option to contribute even more to their retirement savings. The SECURE Act 2.0 catch-up contribution changes allow people in this age group to make larger catch-up contributions. This expanded limit is part of broader 2025 401(k) catch-up changes designed to support workers in their final years before retirement.

Employees age 60 to 63 can contribute $10,000 or 150% of the standard catch-up amount (whichever is greater). For 2025, the standard catch-up contribution is $7,500, which means eligible workers in this age group can contribute up to $11,250 in additional catch-up contributions. When added to the regular employee contribution limit of $23,500, eligible savers can contribute up to $34,750 to a 401(k) plan in 2025. This expanded limit applies to 401(k), 403(b) and most 457 plans, along with the federal government's Thrift Savings Plan.

Similar updates apply to SIMPLE 401(k)s. Participants in a SIMPLE plan in the 60–63 age range can contribute $16,500 plus an additional $5,250 on top of regular SIMPLE 401(k) contribution limits totaling $21,750 starting in 2025.

For workers approaching retirement, maximizing these new catch-up contributions could help close savings gaps and provide more financial flexibility in the future. For example, someone in their early 60s who took time off to care for children or an aging family member may be able to take advantage of this higher limit to make up for missed savings years.

Instead of requiring employees to opt into retirement plans, new 401(k) and 403(b) plans will automatically enroll eligible workers starting in 2025. The minimum contribution rate is 3%, up to a maximum of 10%. Each year, that contribution rate must automatically increase by at least 1% until it reaches at least 10%, with a cap of 15%. These automatic enrollment provisions are designed to encourage consistent retirement savings by making participation the default option for workers.

Employees still will have the flexibility to opt out or adjust their 401(k) contribution rate if they choose. For employers, offering automatic enrollment can increase overall participation rates and help employees build stronger financial futures. Plans created before December 29, 2022, and certain small or new employers are exempt from these requirements.

Mandatory auto-enrollment reflects a growing trend toward simplifying retirement saving and helping employees start saving earlier, which can lead to higher account balances over time.

Another important change in 2025 will improve access to savings plans for part-time workers. Under the SECURE Act 2.0, long-term, part-time employees will be eligible to participate in their employer's retirement plans after completing two consecutive years of service with at least 500 hours worked each year. Previously, the requirement was three years.

This change means more part-time workers will have the opportunity to save for retirement through employer-sponsored plans like 401(k)s. It's a step toward increasing retirement plan access among a broader range of employees, including those with reduced schedules—a path for many during their early retirement years.

Changing jobs can come with the challenge of managing multiple retirement accounts. To address this, the SECURE Act 2.0 introduces automatic portability provisions to simplify transferring your retirement savings when you switch employers.

Under the new guidelines, if you leave a job with a retirement account balance of $7,000 or less, your savings plan automatically can be transferred to your new employer's plan—if the new plan accepts rollovers.

Without automatic portability, small balances often get pushed into low-interest custodial IRAs or cashed out entirely. Some key benefits of automatic portability for employees include:

• Streamlines the 401(k) rollover process during a job change, making it easier to stay on track
• Consolidates your accounts so your dollars can grow uninterrupted long term
• Reduces your chances of forgetting about old accounts
• Makes it less likely you'll cash out early, which may trigger unexpected taxes and penalties

For employers, automatic portability can lead to fewer inactive accounts to manage, less fiduciary risk from abandoned accounts and reduced fees and complexity tied to managing large participant lists.

Balancing student loan repayments with retirement savings can be challenging. To help, the SECURE Act 2.0 includes a new provision, effective for plan years starting after December 31, 2023, that gives employers the option to match student loan payments as if they were payments to a qualified retirement plan (similar to how a 401(k) match works).

That means if you're paying off student loans, you still can get an employer match in your retirement plan—even if you're not contributing to it directly. The payments must be for qualified education loans taken out by you, your spouse or a dependent. You must certify each year that you make payments. If you do, your employer can contribute a match to your 401(k), 403(b), 457(b) or SIMPLE IRA, just like they would if you were directly contributing from your paycheck.

This change provides a way to keep growing your retirement savings even if your budget is tight, especially early in your career when many still are managing student loan debt. For example, a recent grad focused on paying off loans may not have extra cash for retirement, but with this new rule, they still can get a match and start building long-term savings.

The SECURE 2.0 Act brings major changes to required minimum distributions (RMDs) from retirement accounts. As of January 1, 2023, the RMD age moved from 72 to 73. It will rise again to 75 starting in 2033. For retirees, that means more flexibility in managing their retirement savings and tax planning strategies.

Roth IRAs aren't subject to RMD requirements during the account owner's lifetime since the money already has been taxed. Starting in 2024, Roth 401(k)s and Roth 403(b)s don't require minimum distributions, giving these accounts more time to grow tax-free, just like Roth IRAs.

Higher contribution limits, expanded catch-up contributions, automatic enrollment and student loan matching all help make it easier to build your retirement savings in 2025. Long-term changes, like raising the RMD age, also provide more flexibility down the road.

Contributing to your 401(k) consistently each year is one of the best opportunities to add to your retirement savings. Talk with a Thrivent financial advisor to decide the best level of retirement contributions for your goals.