The new limits and changes for 401K Catch Up Contributions.

The regular 401k limit on contributions tops out at $23,500 for 2025, and just in case the IRAs are still at $7,000.

If you’re turning age 50 by the end of 2025 the catch-up amount will still be $7,500. But, under the Secure Act 2.0, if you’re age 60 to 63, your catch-up contribution is now up to $11,250. However, if you turn age 64 you go back to the $7,500.

A little clarification on the age determination. If you turn 60 on December 31, 2025, you get the increased catch-up contribution of $11,250. Simply put, your age at December 31, 2025 is used for catch-up determination.

Also, if your company has any HCE, highly compensated employees who have limited contributions because of the non-discrimination test, remind them that the catch-up amount does not count toward the non-discrimination test. If they happen to be older, they can bump up their usual catch-up to the higher rate stated above.

HCE in 2025 is anyone who has earned more than $155,000 in 2024 and if they earned more than $160,000 in 2025 they are an HCE for 2026.

2026

Forced ROTH in 2026 on catch-up contributions if the employee makes more than $145,000 in 2025.

AND

They cannot make those catch-up contributions if the plan does not have a ROTH feature. Ouch!!!

If you’d like me to figure out what your retirement plan costs are free of charge, schedule some time, HERE Calendly – Ken Gibbons Financial Engineering LLC  or call me at 908-307-8511

As always, seek the advice of your retirement plan professionals before implementing any method on your own.