SECURE Act 2.0 catch-up contribution changes: What you need to know

You may have started out decades ago with big plans to save for retirement. You contributed what you could to your 401(k) and may have even opened a Roth IRA. But over the years, as other financial needs competed for your dollars, perhaps you didn't sock away quite as much as you'd hoped.

Good news: As you reprioritize retirement, you can add more to your nest egg to help close that gap. Once you turn 50, the maximum amount you can contribute each year to retirement savings accounts goes up. And depending on your age, that amount may be even higher soon thanks to SECURE Act 2.0 catch-up contribution provisions taking effect in 2025 and 2026.

Passed in 2022, the SECURE Act 2.0 overhauled key aspects of how you can set aside—and access—money in retirement savings accounts. Provisions that have taken effect as of 2024 have changed required minimum distributions, SIMPLE IRA contributions, early withdrawals, qualified charitable distributions and more.

More changes are slated over the next several years. They include adjustments to requirements surrounding the catch-up contributions you can make as you approach retirement.

Learn more about the 2024 provisions of the Secure Act 2.0

A catch-up contribution is the extra amount Americans age 50+ are allowed to put into retirement savings accounts. Currently, people of any age can contribute up to $23,000 annually to a workplace retirement plan, such as a 401(k) or 403(b). But if you're 50 or older, you can increase your annual contribution (by up to $7,500 as of 2024) to bolster your savings as retirement nears.

The SECURE Act 2.0 will soon increase the maximum catch-up contributions you can make in the years you reach ages 60, 61, 62 and 63. At those ages, you can make annual catch-up contributions to your 401(k) or 403(b) up to $10,000 or 150% of the standard catch-up contribution at the time, whichever amount is greater.

The provision takes effect Jan. 1, 2025. Going forward, the increased catch-up contribution allowance will be indexed for inflation.

Another forthcoming change implemented by the SECURE Act 2.0 is a requirement that catch-up contributions by high earners be put in a Roth account. That means those catch-up contributions will be after-tax dollars—unlike the pre-tax contributions typically made to traditional 401(k) and 403(b) plans. So while you'll have to pay taxes on your contributions when you put the money in your account, your qualified withdrawals after reaching age 59½ will be tax-free.^*

The new rule takes effect in 2026. Starting then, if you earned more than $145,000 in the previous year, any catch-up contributions you make must be put into a Roth 401(k) or Roth 403(b). If you earned $145,000 or less in the previous year, you'll be exempt from the SECURE Act 2.0 Roth catch-up requirement and have the option of making your catch-up contributions with either pre-tax or after-tax dollars.

The act provides for the $145,000 income threshold to adjust for inflation annually as time goes on.

Like 401(k)s, traditional and Roth IRAs also limit annual contributions. As of 2024, they're capped at $7,000 plus an additional catch-up contribution of up to $1,000 if you're age 50 or older. That maximum catch-up amount hasn't changed for the past 18 years, but now the limit will adjust in $100 increments based on inflation. So you may be able to make larger IRA catch-up contributions in coming years.

Maximizing contributions to a 401(k) or other tax-advantaged retirement savings plan offers financial benefits regardless of your age. Catch-up contributions can be especially helpful if you started saving for retirement late or have concerns about whether you've built up an adequate nest egg.

Beginning in 2025—because of the SECURE Act 2.0—you can boost your catch-up contributions between ages 60 and 63. That may help you grow the funds you'll rely on later in life—or pass along to loved ones or charitable causes. Making larger catch-up contributions may also lower your taxable income during some of your later, most lucrative working years.

The SECURE Act 2.0 is a complex law that will continue to usher in changes over the next few years. Soon, you'll be able to make larger catch-up contributions to your retirement savings plan. And, depending on your income, you might have to direct those contributions to a Roth account.

With those shifts on the horizon, now's a good time to check in with your Thrivent financial advisor. A conversation can help you better understand the law and optimize its impact on your future.