Welcome to 2025! As we move into the next year, it’s time to review all things rule-related as it concerns your retirement plan and accounts. The Secure 2.0 Act has a few new rules to be aware of, as well as provisions that are designed to help individuals save more for retirement. Donna Levalley’s article, Six Changes to IRAs and 401(k)s in 2025 | Kiplinger, goes into detail on the below changes:
Super-Sized 401(k) Catch-Up Contributions (Aged 60–63):
For participants aged 60 to 63, the catch-up contribution limit will rise to $11,250 for 2025, increasing the overall contribution limit for this group to $34,750. This is an added boost to the catch-up contribution rules, which allow those over 50 to contribute more to their 401(k) accounts.
Automatic 401(k) Enrollment:
New 401(k) plans established after December 29, 2022, will have an automatic enrollment feature beginning in 2025. To encourage and help boost retirement savings, employees will be automatically enrolled with a contribution rate between 3% and 10%, with an annual increase of 1% until they reach at least 10%. However, employees can opt out or change their contribution rates.
SIMPLE IRAs and Catch-Up Contributions (Aged 60–63):
SIMPLE IRA contribution limits will rise slightly in 2025. Those aged 60 to 63 will be eligible for higher catch-up contributions, with a new limit of $5,250 for 2025, as part of a gradual increase in contribution limits for older workers.
New 10-Year Rule for Inherited IRAs:
Beginning in 2025, most beneficiaries of inherited IRAs will need to withdraw all funds from the account within 10 years of the original account holder’s death. The “stretch IRA” strategy, which allowed extended tax-deferred growth, is no longer available for most beneficiaries. See the article or speak with your Fiduciary Investment Advisor if you have specific questions on your Inherited IRA.
Inherited IRA RMD Penalties:
Starting in 2025, if beneficiaries do not take required minimum distributions (RMDs) from inherited IRAs, they will face a 25% penalty.
Retirement Savings “Lost and Found”:
A new searchable database, created by SECURE 2.0, will help individuals locate lost retirement accounts, including 401(k)s. This database, managed by the Department of Labor, will be available starting in late 2024 and workers can use it to find accounts they have lost track of over their careers.
As the rules and provisions continue to evolve, it’s important to continue to work with your Fiduciary Investment Advisor to properly leverage all the tools available to you. Contact your advisor today with any questions, and Happy New Year!