Retirement planning is changing. The Secure Act 2.0 changes in 2025 will bring important updates that affect 401(k) plans. These updates aim to help people save more and plan smarter for retirement. If you have a 401(k) or offer one as an employer, now is the time to understand what’s ahead.
Here’s a simple guide to the new rules and how they can help you save for the future.
What is Secure Act 2.0?
The Secure Act 2.0 builds on the original Secure Act of 2019. It was signed into law in 2022 and adds new ways to save for retirement. The changes happening in 2025 focus on helping people save more and giving them more control over their retirement plans.
Key Secure Act 2.0 Changes for 2025
1. Super Catch-Up Contributions
In 2025, people aged 60 to 63 can contribute more to their 401(k). You can add the greater of:
- $10,000 (adjusted for inflation), or
- 150% of the regular catch-up contribution limit for those over 50.
What this means for you:
This rule helps people in their 60s save more during their peak earning years.
2. Automatic Enrollment in 401(k) Plans
Starting in 2025, new 401(k) plans must automatically enroll eligible employees. The default savings rate will start at 3% and increase by 1% each year, up to at least 10%. Employees can choose to opt out.
What this means for you:
If you’re an employee, you won’t need to take action to join the plan. For employers, this rule helps encourage saving.
3. Roth 401(k) Employer Matches
In 2025, employers can match contributions in a Roth 401(k). These matches will be taxed at the time of contribution, but the funds grow tax-free.
What this means for you:
This option gives you more control over your tax planning. It also allows for tax-free income in retirement.
4. Higher Age for Required Minimum Distributions (RMDs)
The age for taking required minimum distributions will increase to 73 in 2023 and to 75 in 2033.
What this means for you:
You’ll have more time to grow your savings before you need to withdraw them.
5. 529 Plan to Roth IRA Rollovers
Unused 529 college savings funds can be rolled into a Roth IRA starting in 2025. There is a lifetime limit of $35,000. The 529 plan must be at least 15 years old, and annual Roth IRA limits apply.
What this means for you:
This change gives families a way to use leftover college funds for retirement.
How These Changes Help 401(k) Participants
The Secure Act 2.0 2025 changes offer several benefits for people saving for retirement:
- More Savings Options:
The super catch-up contributions let you save more in your 60s. - Tax-Free Growth:
Roth employer matches help you grow retirement savings tax-free. - Easy Enrollment:
Automatic enrollment helps employees start saving sooner. - Longer Growth Period:
Delaying RMDs gives you more time to grow your nest egg. - Flexibility for Families:
529 to Roth IRA rollovers help repurpose leftover education funds.
What Employers Need to Know
If you’re a small business owner, here’s how these changes affect you:
- Automatic Enrollment: New plans must include auto-enrollment.
- Roth Matching Options: Offering Roth matches can make your plan more attractive to employees.
- Tax Credits: Expanded tax credits make it easier to set up and maintain retirement plans.
How to Prepare for 2025 Changes
To get ready for the Secure Act 2.0 updates:
- Maximize Contributions: Plan ahead to use the new super catch-up limits.
- Consider Roth Options: Review the benefits of Roth contributions for your tax plan.
- Review Your 401(k) Plan: Employers should ensure compliance with auto-enrollment rules.
- Evaluate Education Funds: If you have a 529 plan, think about using leftover funds for a Roth IRA.
Final Thoughts
The Secure Act 2.0 2025 changes bring exciting new ways to save for retirement. Whether you’re an employee or an employer, these updates provide more options and flexibility. The act actually impacts how businesses complete the W-2. As a business owner, learn why you need the EIN and how to apply for it here.
Start planning today to make the most of these changes. A brighter financial future starts with smart savings decisions and long-term growth!
