2025, 401K Super Catchup (Age 60-63) Question

[sdawson]

401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000 | Internal Revenue Service

IR-2024-285, Nov. 1, 2024 — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2025 has increased to $23,500, up from $23,000 for 2024.

www.irs.gov

And other article report that "SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500."

At 62 and still working, I want to take advantage of that. However, I noticed that in my last paycheck, my elected contribution was reduced from $1000 to $500. I added it up and yep, I hit the 7500 catchup limit and that was it.

Before I go to HR or Fidelity, I wanted to get the facts correct. My initial thought was that the software does not take my age into account and just automatically capped me out at the standard $7500 limit rather than the higher limit based on my age.

However, in reading this kiplinger article

New SECURE 2.0 Super 401(k) Catch-Up Contribution for Ages 60-63

SECURE 2.0 changes will allow older workers to increase their retirement savings. Here's what you need to know.

www.kiplinger.com

It says these are the requirements, and I am wondering if that last requirement is preventing further catch up in excess of the 7500? That is, in order to get company match, I space out my 401K contributions so as always ensure the match, which means not hitting my max deferral amount until the last paycheck of the year.

So wondering if that "super catch up" only applies after one has reached the standard $23.5K contribution? If so, well, then it is no use to me, as I'd have to give up employer match in order to hit that before the end of the year.


"For example, the catch-up limit for those 50+ for 2024 was $7,500. So, the IRS has announced that for 2025, the enhanced catch-up contribution limit for those 60-63 is $11,250.

To qualify for the enhanced catch-up contributions, participants must meet specific criteria:

• Be 60, 61, 62, or 63 by the end of the calendar year
• Generally already contributed the maximum deferral amount"
  
  

 

[Gumby]

I don't know your marginal tax rate, so it's hard to say for sure, but I think if you search the forum a little, you'll find many people who now regret that they put so much money into tax deferred savings and too little into after tax accounts.

 

[Koolau]

I don't know your marginal tax rate, so it's hard to say for sure, but I think if you search the forum a little, you'll find many people who now regret that they put so much money into tax deferred savings and too little into after tax accounts.

Yes, I'm exhibit one!

Still regretting so much tax deferred savings. Doing so causes some unanticipated problems later on. For instance, RMDs may put you above IRMAA and NIIT limits.

Yes, it's nice shielding yourself from taxes while you're w*rking, but you have to pay the piper eventually and you may have more income then than you expected. Words to the wise. Run some scenarios to see what could happen. YMMV

 

[SevenUp]

I don't know your marginal tax rate, so it's hard to say for sure, but I think if you search the forum a little, you'll find many people who now regret....

The full original quote is no doubt true, but the continuation could also be "...working longer than necessary for them to have 'enough' in retirement." When avoiding the latter scenario, traditional contributions work out well.

As is usually true in personal finance, "it depends...."

 

[sdawson]

Hi folks, I understand your concernsand suggestions.


Still, does someone know th answer to the original question?

So wondering if that "super catch up" only applies after one has reached the standard $23.5K contribution? If so, well, then it is no use to me, as I'd have to give up employer match in order to hit that before the end of the year.

 

[SevenUp]

Hi folks, I understand your concernsand suggestions.


Still, does someone know th answer to the original question?

So wondering if that "super catch up" only applies after one has reached the standard $23.5K contribution? If so, well, then it is no use to me, as I'd have to give up employer match in order to hit that before the end of the year.

I don't see anything in 26 USC 414: Definitions and special rules (see 414(v)(2)(B)(i) and the "Amendment of Subsection (v)(2)") that distinguishes the higher catch up amount from the normal one except for the amount itself.

 

[silvor]

Hi folks, I understand your concernsand suggestions.


Still, does someone know th answer to the original question?

So wondering if that "super catch up" only applies after one has reached the standard $23.5K contribution? If so, well, then it is no use to me, as I'd have to give up employer match in order to hit that before the end of the year.

Your company doesn’t “true up” your contributions at the end of the year?

Theoretically I can max out early in the year and the company will give me the difference of 5% of salary minus what they already gave me on Dec 31.

 

[tulak]

I’m not following your situation. Why was your contribution reduced from $1,000 to $500 in your last paycheck? Do you contribute a fixed amount or a percentage of pay?

At 1k/paycheck, that means you’ve only contributed 6k/7k so far for 2025?

I’m not following your comment about how you hit the ‘7500 contribution limit’?

Catch-up contributions should happen after the standard contribution limit is hit. On my paycheck, it shows up as a separate catch-up contribution, but I image that is employer specific, and only after I’ve maxed my standard contribution limit for the year.

Does your employer care if it’s a standard contribution or catch-up contribution?

For my 401k, I can contribute a percentage of my paycheck. I always make sure that it is $30,500 / 24 = $1,270.83 per paycheck (50+ catch-up contribution). I actually contribute more than this, because my employer contribution maxes at 4k and has no per paycheck requirement. I’ve already gotten my full employer match for this year.

In your case, I would make sure that it is at least $34,750 / 24 = $1,447.92 per paycheck.

If you have questions on this, I’d ask HR and they should be able to explain this to you. I don’t know how big your company is, but HR has been helpful when I’ve had questions.

And I don’t get the ‘max deferral amount’ bullet point in the article. At 62, that should be $23,500 + $11,250. Seems kinda obvious that’s going to be a limit, since everyone has one?

 

[sdawson]

Your company doesn’t “true up” your contributions at the end of the year?

Theoretically I can max out early in the year and the company will give me the difference of 5% of salary minus what they already gave me on Dec 31.

nope it does not. 6% match which is great. but no true up.

 

[sdawson]

I’m not following your situation. Why was your contribution reduced from $1,000 to $500 in your last paycheck? Do you contribute a fixed amount or a percentage of pay?

At 1k/paycheck, that means you’ve only contributed 6k/7k so far for 2025?

We work with Fidelity. There are separate boxes for normal contribution and catch-up. For normal, it is percent based. I make sure to hit at leat 6% each paycheck to get the match, but then adjust it during the year to hit the $23,500 limit.

Then there is a separate fixed amount for catch-up. I put it at 1,000 as I want to just hit the limit there and be done with it for the year. Was fine for first 7 checks of the year, but the 8th check they only took out 500 rather than 1000, which means they see I hit the standard 7500 catch up limit.

I will contact HR or Fidelity to get clarity here. Could just be that they are not taking the 2025 super catch up based on my age into account and capped my catch up at 7500. But thought I'd ask here first. My 'max deferral' was clumsy speak for hitting the $23.5k standard contribution limit before I could contribute the full $11,500 to the catch up.

I’m not following your comment about how you hit the ‘7500 contribution limit’?

Catch-up contributions should happen after the standard contribution limit is hit. On my paycheck, it shows up as a separate catch-up contribution, but I image that is employer specific, and only after I’ve maxed my standard contribution limit for the year.

Does your employer care if it’s a standard contribution or catch-up contribution?

 

[tulak]

Got it. Yeah, it sounds like they’re not taking into consideration your age for your max contribution. I would give them a call.

 

[Morgan22]

On Fidelity it mentions the additional catch-up for people ages 60 - 63, but with the magic words added "if you plan allows". You need to take a look at your SPD (summary plan description) to see if your plan allows this.

401(k) contribution limits 2023, 2024, and 2025 | Fidelity

Here's how much you can contribute to your 401(k) in 2023, 2024, and 2025.

www.fidelity.com