Key 2025 Retirement Plan Changes: 5 Tips Employers and Employees Need to Know

As we look ahead to 2025, there are some important changes coming to retirement accounts like IRAs and 401(k)s that could have a big impact on your savings strategy. Whether you’re just starting to save for retirement or you’re already deep into your planning, these updates are worth paying attention to. Let’s break down the key 5 Important Changes for IRAs and 401(k)s in 2025: What You Should Knowchanges you can expect in 2025 and how they might affect your business and employees:

1. Higher Contribution Limits for IRAs and 401(k)s

In 2025, the IRS is upping the contribution limits for both 401(k)s and IRAs, giving employees more room to save for retirement. Here’s what you can expect:

• 401(k) Contributions: The contribution limit for 401(k) plans will rise to $23,000 (up from $22,500 in 2024). For employees 50 and older, they can take advantage of catch-up contributions that could increase to $7,500. That means if they’re 50+, they can contribute up to $30,500 to their 401(k) in 2025.

• IRA Contributions: For IRAs, the contribution limit is expected to increase to $7,000 (up from $6,500). Plus, those aged 50 and older can contribute an additional $1,000, bringing the total to $8,000.

These higher limits are a great opportunity for employees to save more, and it’s something businesses can highlight when discussing retirement benefits.

2. Bigger Catch-Up Contributions for Older Workers

Thanks to the SECURE 2.0 Act, employees over 50 have already been able to contribute more to their retirement accounts, but in 2025, that opportunity gets even better. Employees aged 60-63 can make catch-up contributions of up to $10,000 to their 401(k) or 403(b) plans, on top of the regular contribution limits.

This is a big win for employees in their early 60s, especially those who want to make up for any lost time when it comes to retirement savings. It’s something employers can promote as a way to help older workers boost their retirement savings as they approach retirement age.

3. Roth 401(k) Matching Contributions

Starting in 2025, employers will be able to offer Roth 401(k) matching contributions. Right now, most employer contributions are made on a pre-tax basis, which means employees will pay taxes when they withdraw the funds in retirement. But with this new rule, employers can choose to make Roth contributions instead. This means that matching funds will grow tax-free, and employees won’t have to pay taxes on them when they retire and withdraw them.

This is a great way to provide employees with more flexibility in how they save for retirement, and it could be especially beneficial for employees who expect to be in a higher tax bracket when they retire.

4. Automatic Enrollment in 401(k)s

Starting in 2025, employers will be required to automatically enroll employees in 401(k) plans, unless they opt out. The goal here is to make it easier for workers to start saving for retirement, especially since many people don’t sign up for 401(k)s on their own.

• Default Contribution Rate: The default contribution will be 3% of salary, but employees can change it or opt out entirely.

• Escalating Contributions: Over time, the contribution rate will automatically increase, potentially up to 10%-15% of salary. This is a great way to help employees save more without them having to think about it.

  
  

This change could significantly boost retirement savings, especially for employees who may not have considered participating in their company’s 401(k) plan before.

5. No More RMDs for Roth 401(k)s

Roth IRAs have always been exempt from Required Minimum Distributions (RMDs), which require account holders to start withdrawing money at a certain age. Until now, Roth 401(k)s were still subject to RMDs. But starting in 2025, Roth 401(k) holders will no longer need to take RMDs. This means employees can leave their money in the account longer and allow it to grow tax-free.

This change gives employees more flexibility with their retirement funds and can help those who don’t need the money right away avoid paying unnecessary taxes. For employers, this could make Roth 401(k) plans even more attractive to employees.

Why This Matters for Your Business

These changes are all designed to make it easier for employees to save for retirement, and that can be a big win for your business too. Higher contribution limits, Roth 401(k) options, and automatic enrollment are all ways to help employees build a more secure financial future.

In particular, the bigger catch-up contributions and the removal of RMDs for Roth 401(k)s offer more flexibility for older employees who are looking to maximize their savings as they approach retirement. This could also help boost employee satisfaction and retention, as they’ll feel more supported in their financial planning.

As a business, it’s important to stay ahead of these changes and make sure your retirement offerings are up to date. Whether you’re reviewing your 401(k) plan options or discussing benefits with employees, these updates are a great opportunity to help your workforce save more for their future.

Now is a good time to start thinking about how these changes could impact your retirement strategy. With 2025 just around the corner, staying informed and making adjustments to your benefits can put both your company and your employees in the best possible position for a secure financial future.