As 2025 approaches, significant modifications to retirement planning are on the horizon. This is an excellent moment to reevaluate your retirement savings and ensure that you are on the right path. The adjustments, part of the Secure Act 2.0 legislation enacted in 2022, seek to improve retirement savings options and facilitate “max savers.”

Adopt the 10% Guideline

Financial specialists suggest setting aside 10-15% of your gross income for retirement. For instance, with an annual salary of $60,000, the target savings would range from $6,000 to $9,000 each year. As the contribution limit for 401(k) plans rises to $23,500 in 2025, this 10% guideline means that you would need to earn significantly more to reach that cap. For example, someone earning $80,000 annually would contribute $8,000, a figure well below the $23,500 maximum, thus allowing adherence to the 10% guideline while fully utilizing the tax advantages of a 401(k).

Enhanced Catch-Up Options for Older Workers

A notable shift for this year involves those aged 60 to 63, who will have the opportunity to make higher catch-up contributions to their 401(k) accounts. The new limit permits either $10,000 annually or 150% of the standard catch-up contribution, depending on which figure is greater.

This increase in catch-up limits presents a great chance for employees to bolster their retirement savings during their most lucrative earning years. Data indicates that over half of 401(k) participants earning above $150,000 and nearly 40% with account balances over $250,000 made catch-up contributions in 2023, as reported by Vanguard’s 2024 How America Saves report.

Assess Your Financial Capacity

Evaluate your monthly net income against your expenditures. Identify areas where you can cut back in order to allocate additional funds toward your retirement savings. Even modest reductions, such as preparing meals at home instead of dining out or canceling unused memberships, can significantly impact your savings.

Strive to contribute at least enough to avail yourself of any employer matching contributions, as this represents free money that should not be overlooked. If your employer matches up to 5% of your salary, ensure your contributions meet that threshold.

Make a Commitment to Incremental Increases

If committing to 10% seems daunting, that’s completely understandable. While this figure is widely accepted as standard financial advice, individual financial situations can vary greatly. Start by increasing your contribution rate by just 1% this year. This slight adjustment can significantly grow your retirement savings over time, without imposing a drastic change on your lifestyle. You can continue this practice each year until you achieve your desired savings rate.

The essential factor is to initiate savings as early as possible and remain diligent. If uncertainty exists regarding your target savings, consult with a financial advisor who can assist in refining your savings strategy.