Catching Up On Retirement Contributions under SECURE Act 2.0

March, 21 2025 by Carolyn Richardson, EA, MBA

If you’re like many Americans, you are looking forward to sometime in the future when you can turn in your office badge, hand back the keys, and finally retire. Perhaps some sandy beach in a sunny and warm location is in your future or maybe experiencing more travel and playing with your grandchildren are your goals. Regardless of your plans for retirement, you may be wondering to yourself when you can retire and, more importantly, whether you will have enough money when you retire to do what you want to do without stressing over the costs.

First, some fairly grim statistics. Americans are struggling to save enough money towards their retirement, even while most of them are optimistic that they will have enough money to live comfortably in retirement. Many workers lack access to employer-sponsored retirement plans, such as 401(k)s. The Bureau of Labor Statistics estimates that nearly 70% of employees have access to employer-sponsored plans, but only half of that group actually participates. In fact, an AARP survey in 2024 showed that 20% of Americans over the age of 50 have no retirement savings at all, while nearly 30% of all workers have no savings towards retirement, and 61% of Americans are worried that they will not have enough money to support themselves in retirement. Many Americans estimate they will need to continue working even when they are retired.

While delaying when you collect Social Security can boost your benefits under the system, this is only an option if you have the savings needed to get you over your full retirement age. According to the Retirement Confidence Survey, while many people expect to retire at 65, about 70% of retirees report they retired earlier than that, with a median retirement age of 62 (the earliest age that you can start collecting benefits) even though they started benefits at a median age of 64, and 70% of retirees said their reason for retiring was out of their control. And 65 is no longer the age for full benefits under Social Security. In fact, you had to be born before 1943 to still receive full benefits at 65 (which would put you in your eighties in 2025). For those born between 1943-1954, full benefits are at 66; for those born between 1955-1960, the full benefits gradually increase from 66 to 67, depending on what year you were born, and for those born in 1960 or later, your full retirement age is 67 years of age.

Speaking from experience, getting old is inevitable, and retirement gets closer faster than you think it will. So, if you’re suddenly seeing it looming on the horizon, what are your options for making up for lost time?

In 2022, Congress enacted the SECURE 2.0 Act of 2022 (SECURE 2.0), which adjusted some of the contributions you can make to your retirement plans, such as IRAs, and most employer-sponsored plans, such as 401(k), 403(b), and 457 plans, and the federal government’s Thrift Savings Plan. While you can contribute to these plans at any age, provided you have “earned income,” such as wages, for taxpayers who are 50 years of age or older, you can also contribute “catch-up” contributions, which are designed to help you catch up on saving for retirement if you feel you haven’t been saving enough.

For those of you who have an employer plan, the limit on annual contributions for 2025 is $23,500, up from $23,000 for 2024. The catch-up contribution for employees aged 50 or older is $7,500 for 2025 (and was the same for 2024). This means an employee who is at least 50 years old can contribute up to $31,000 for 2025. Also, under SECURE 2.0, for employees who are aged 60 through 63, an even higher catch-up contribution is allowed. This catch-up contribution is $11,250 instead of the $7,500, meaning you can contribute up to $34,250 for 2025.

All taxpayers can also contribute to a traditional IRA account if they have earned income from employment or self-employment. However, contributions to IRAs are more limited than contributions to employer-sponsored plans and can also be limited by your income if you or your spouse participate in an employer-sponsored retirement plan. For 2025, the full contribution amount for a traditional (deductible) IRA is $7,000 for all taxpayers, with an additional catch-up amount of $1,000 allowed if you are aged 50 or older. This limit applies to both traditional IRAs and Roth IRAs. The catch-up contribution amount was amended by SECURE 2.0 to allow for an annual cost of living adjustment but has not yet been increased.

If you or your spouse are covered by a retirement plan at work (regardless of whether you actually participate), the amount you can deduct for your IRA contributions is limited by your income as follows: for single taxpayers, it starts to be reduced between $79,000 and $89,000; for married couples filing jointly, if the spouse making the contribution is also covered by an employer plan, the phase-out is between $126,000 and $146,000; for married filing jointly couples where the IRA contributor is not covered by an employer plan but their spouse is covered, the phase-out ranges is $236,000 and $246,000; and for married taxpayers who file separately and are covered by an employer plan, the phase-out range is between $0 and $10,000 (and is not adjusted for inflation).

These phase-out ranges are slightly different if you are contributing to a Roth IRA. While Roth IRA contributions are not deductible, the income ranges are much higher. For a single or Head of Household contributor, the income phase-out range is between $150,000 and $165,000; for married couples filing jointly, it is between $236,000 and $246,000, and for a married taxpayer filing separately, it is still between $0 and $10,000.

If you are a low-to-moderate income worker and you contribute to retirement accounts, you may also be eligible for the Saver’s Credit (also known as the Retirement Savings Contributions Credit). The amount of the credit will vary depending on the contribution amount and your AGI, but it phases out completely when your income is $79,000 for married couples filing jointly; $59,250 for heads of household, and $39,500 for single and married filing separately taxpayers. This credit will change under the SECURE 2.0 Act in 2027 and will be replaced with a tax credit paid by the IRS as a contribution to the individual’s applicable retirement savings account when they make a qualified savings contribution during the year. Essentially, this is a matching contribution up to 50% as long as your income doesn’t exceed certain thresholds, currently set at $41,000 for married filing jointly and Qualified Surviving Spouses, $30,750 for heads of household, and $20,500 for single and married filing separately taxpayers.

And lastly, for those of you who have SIMPLE retirement accounts, the contribution is increased to $16,500 for 2025. Under changes made by SECURE 2.0, some SIMPLE plans may have a higher contribution limit, which is $17,600. For those who are 50 or older, the catch-up limit for most SIMPLE plans is $3,500 for 2025, but again, for certain applicable SIMPLE plans, those 50 and older get a higher catch-up limit of $3,850. And like other plans, those aged 60-63 get an even higher catch-up provision of $5,250.

While you may be thinking to yourself that there’s no way you can afford to contribute to a retirement account, remember that even setting aside a small amount of money each pay period will pay off in the long run due to the compounding of interest and growth in your account. Therefore, it’s worth your while to try and save even as little as $25 per week, and if you can’t afford that, then do whatever you can. If your employer matches a portion of your contributions, you are also missing out on an important part of your overall compensation, as these matching contributions are not taxable income to you when they are made and can be a substantial amount of money. Even if your employer contributes only 3% of your salary, which seems typical of many plans, that is effectively a 3% nontaxable raise!

Another way to save is to make contributions from any raises or bonuses that you receive. For example, if you are given a 3% raise, raise your contributions to the employer plan by 1%. That still gives you a 2% raise to your take-home pay, which may not seem like much in these days of rising prices, but it’s far more easily adaptable to live on just a 2% increase, even if you’ve been living paycheck to paycheck. If you get a raise, contribute half of it to your retirement savings and enjoy the other half. These small changes in your contribution habits can pay off significantly when you are ready to retire, and who doesn’t want to retire with no financial worries?