Big changes are coming to retirement savings in 2025. The financial advisors at Charter Financial in Naples, Florida, are positioned to help you with retirement planning amidst an ever changing landscape. Keep reading for additional insights and consult with an expert financial analyst in Naples, FL today to ensure your retirement plan is on target.
While some changes have already taken effect, by 2025 there will be big changes to 401(k), IRA, Roth and other retirement savings plans, with more changes going into effect in 2026 and 2027.
Here are six changes to expect:
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Automatic 401(k) Enrollment
The SECURE Act 2.0’s Section 101 requires most companies with more than ten employees to enroll eligible employees into its retirement plan automatically at a contribution rate of at least 3%. That will make it much easier for employees to save for retirement. With some exceptions for small businesses, SECURE 2.0 requires 401(k) and 403(b) plans to automatically enroll eligible participants, who can opt out of participation. The Labor Department points to tax advantages associated with 401(k) participation in addition to helping small businesses attract and retain employees.
Emergency Withdrawals May Be Easier
Employers can now offer employees who are not highly compensated the opportunity to link their retirement plan to an emergency savings account, per Section 127 of the SECURE 2.0 Act. That could make it easier for employees to withdraw funds from their retirement accounts without penalty or taxes for certain approved emergency situations. While these annual contributions are limited to $2,500 (or less, as determined by the employer), the first four withdrawals a year aren’t subject to taxes or penalties. Savers worried about emergency financial needs will appreciate this change.
Older Workers Have Higher Catch-up Contributions
Under Section 109 of the new law, people aged 50 or older can make a $7,500 catch-up contribution to a workplace retirement plan to help them build their retirement savings more quickly. That catch-up contribution increases to $10,000 annually for those aged 60 to 63. After 2025, those amounts will be indexed for inflation.
It’s important to note that Roth catch-up rules were supposed to take effect in 2024. However, he IRS announced that Roth catch-up contributions for high earners age 50 or over won’t go into effect until 2026.
Employer Matching May Now Be Tax-Free
In the past, employers wanting to match their employees’ retirement contributions only had the option to give to pretax accounts, such as a traditional 401(k). Now, under the SECURE Act 2.0 Section 604, employers can match contributions tax free by giving directly to an employee’s Roth 401(k), if they wish.
It’s Easier To Convert School Savings to Retirement Savings
Previously, folks with 529 college savings plans may have had to pay a penalty to withdraw funds for non-school related expenses. Now, after 15 years, 529 beneficiaries can roll over funds into a Roth IRA, under specific situations, per Section 126. The amount contributed each year can’t exceed the annual IRA contribution limit, which is set at a lifetime limit of $35,000. This could make 529s more desirable for people unsure of the exact cost of education or no longer in school.
A New Tax Credit For Lower-Income Savers
The Secure 2.0 Act includes a saver’s tax credit that is designed to help lower-income earners boost their retirement savings. Starting in 2027, under the new law, when contributions are made into a retirement account, the federal government will no longer give an immediate tax break, but instead will match that contribution potentially resulting in more retirement savings.
Consult with an expert financial analyst and wealth management planner in Naples, FL today to preserve your retirement income.
https://finance.yahoo.com/news/retirement-savings-changes-expect-2025-210635218.html