401(k) Catch-Up Contributions Explained: Maximize Your Retirement Savings in 2025

For individuals aged 50 or older, catch-up contributions allow for additional retirement savings during what are often their highest earning years. With updated limits and new provisions taking effect in 2025, this strategy can be especially valuable for those looking to strengthen their financial position ahead of retirement and maximize tax efficiency in what are typically their highest income years leading up to retirement.

Below, I break down the 2025 catch-up contribution limits, rules, and strategic considerations to help you make informed decisions.

What Are Catch-Up Contributions?

Catch-up contributions allow individuals aged 50 or older to contribute above the standard annual limits to retirement accounts. You’re eligible to make catch-up contributions starting in the calendar year you turn 50.

2025 Contribution Limits

Here are the updated 2025 401(k) contribution limits for each plan type:

401(k), 403(b), 457(b):

• Standard limit: $23,500

• Age 50 – 59 & Age 64+ catch-up: $7,500

• Age 60 – 63 catch-up: $11,250

New 401(k) Age 60–63 Catch-Up Limits

Beginning in 2025, a new tier of higher catch-up limits will apply to individuals between ages 60 and 63. Under the SECURE 2.0 Act, these individuals can contribute an additional amount equal to 50% of the regular catch-up contribution for that plan year. For 2025, this equates to an extra $3,750, bringing the total possible contribution to $34,750 for 401(k), 403(b), and 457(b) plans. This enhanced catch-up contribution is optional for employers, so it's important to confirm with your plan sponsor whether this provision is available in your plan.

To learn more, read our article: New Age 60 – 63 401(k) Enhanced Catch-up Contribution Starting in 2025

Pre-Tax vs. Roth Catch-Up Contributions

Employer-sponsored retirement plans often allow participants to choose whether their catch-up contributions are made on a pre-tax or Roth (after-tax) basis. The best approach depends on income levels, expected tax rates in retirement, and broader financial planning goals.

Pre-tax contributions reduce your taxable income today but are taxed when withdrawn in retirement.

Roth contributions provide no current tax deduction but grow and distribute tax-free in retirement.

When Pre-Tax May Make Sense:

• You're in a high tax bracket today (e.g., 24%+)

• You expect to be a lower tax bracket during the retirement years

Example:

Tom is age 60, married, and earns $400,000 annually, placing him in the 32% federal tax bracket. In the next 5 years, Tom expects to retire and be in a lower federal tax bracket. By making pre-tax catch-up contributions now, it will allow him to reduce his current taxable income, while potentially taking distributions in a lower tax bracket later.

When Roth May Make Sense:

• You expect your current tax rate to be roughly the same in retirement

• You already have substantial pre-tax retirement account balances

• You expect tax rates to rising in the future

Example:

Susan is age 52, single filer, earns $125,000 per year, and is in the 22% tax bracket. She expects her income to remain steady over time. By choosing Roth catch-up contributions, she pays tax now at a relatively low rate and avoids taxation on future withdrawals.

Mandatory Roth Catch-Up Contributions for High Earners (Effective 2026)

Starting in 2026, individuals earning $145,000 or more (adjusted for inflation) in wages from the same employer in the previous year will be required to make catch-up contributions to their workplace plan on a Roth basis. This rule applies only to employer-sponsored plans (like 401(k)s) and does not impact Simple IRA plans. For 2025, these Roth rules have been delayed, giving high-income earners time to prepare.

To learn about the rules and exceptions for high earners, read our article: Mandatory 401(k) Roth Catch-up Details Confirmed by IRS January 2025

The Big Picture: Why This Strategy Matters Near Retirement

For individuals within five to ten years of retirement, catch-up contributions provide an opportunity to meaningfully increase retirement savings without relying on higher investment returns or making dramatic lifestyle changes. The added contributions also support strategic tax planning by allowing savers to choose between pre-tax and Roth treatment based on their broader income picture.

Catch-up contributions can help:

• Maximize tax-advantaged savings when your income is typically at its highest

• Take advantage of compound growth on a larger balance

• Strategically shift assets into Roth accounts for future tax-free income

Consider the numbers:

A 60-year-old contributing the full $34,750 annual catch-up amount for three consecutive years could accumulate over $111,000 in additional retirement savings, assuming a 7% annual return. If contributed to a Roth 401(k), those funds would grow and be distributed tax-free, offering valuable flexibility in retirement.

Even if retirement is only a few years away, catch-up contributions can play a significant role in improving retirement readiness and reducing future tax burdens.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What are catch-up contributions and who qualifies for them?
Catch-up contributions allow individuals aged 50 or older to contribute more to retirement accounts than the standard annual limit. Eligibility begins in the calendar year you turn 50, regardless of your income level or how close you are to retirement.

What are the 2025 catch-up contribution limits?
In 2025, employees can contribute up to $23,500 to a 401(k), 403(b), or 457(b) plan. Those aged 50–59 and 64 or older can contribute an additional $7,500, while individuals aged 60–63 can make an enhanced catch-up contribution of $11,250, for a total of $34,750 if allowed by their employer’s plan.

How does the new age 60–63 catch-up rule work?
Starting in 2025, individuals between ages 60 and 63 can make a higher catch-up contribution equal to 150% of the standard catch-up limit. This provision under the SECURE 2.0 Act lets older workers maximize savings during their final working years, but availability depends on whether an employer adopts the rule.

Should I make my catch-up contributions pre-tax or Roth?
The best option depends on your tax situation. Pre-tax contributions reduce taxable income now and are ideal if you expect to be in a lower tax bracket in retirement. Roth contributions are made after-tax but grow tax-free and are advantageous if you expect future tax rates to rise or your income to remain steady.

What is the mandatory Roth catch-up rule for high-income earners?
Beginning in 2026, employees earning $145,000 or more (adjusted for inflation) from the same employer in the previous year must make catch-up contributions on a Roth basis. This means contributions will be made after tax, and future withdrawals will be tax-free.

Why are catch-up contributions especially important near retirement?
Catch-up contributions help individuals nearing retirement boost savings during peak earning years without depending solely on market growth. They also provide tax planning flexibility by letting savers choose between pre-tax and Roth options based on their expected future income and tax rates.