3 Major 401(k) Changes in 2025 You Need to Know
Retirement savers, take note – 2025 is bringing big changes to 401(k) plans.
That’s because the SECURE Act 2.0 introduces changes that could offer investors new opportunities to enhance their retirement savings.
These updates aim to make saving for retirement more accessible and effective for 401(k) savers.
Here’s a breakdown of the top 3 changes to be aware of so you can make informed decisions about your 401(k) in 2025.
Faster 401(k) Eligibility for Part-Time Workers
Good news for part-time workers – starting in 2025, you’ll have quicker access to your employer’s 401(k) plan thanks to a change in the SECURE Act 2.0.
Here’s the deal: If you work at least 500 hours per year (but fewer than 1,000), you’ll now be eligible to participate in your employer’s 401(k) plan after just two consecutive years of service instead of three.
This shift is aimed at helping part-time employees build their retirement savings sooner.
For part-time workers clocking 1,000 or more hours a year, the eligibility rule hasn’t changed – you can still enroll after one year of service.
Whether you’re juggling multiple part-time jobs or scaling back your hours, this change allows you to start contributing to your 401(k) plan sooner – giving your savings more time to grow.
For example, if you’re working two part-time jobs, you could potentially contribute to multiple 401(k) plans.
However, it’s important to remember that your total employee contributions across all 401(k) plans cannot exceed the annual IRS limit.
Bigger Catch-Up Contributions for Older Workers
Starting in 2025, workers who are ages 60, 61, 62, and 63 will be eligible for an even higher catch-up contribution limit: Up to $11,250.
That brings the total contribution for those in this age range to $34,750 ($23,500 regular contribution + $11,250 catch-up contribution).
Of course, you’ll need to earn at least that much to contribute the full amount.
These increased limits provide an opportunity for older workers to potentially boost their retirement savings as they approach retirement.
Whether you’re playing catch-up or simply taking advantage of this added flexibility, these higher limits could possibly make a meaningful difference in your retirement nest egg.
10-Year Rule for Inherited 401(k)s
If you inherit a 401(k) from someone who isn’t your spouse, heads up – big changes are coming in 2025.
Thanks to the SECURE Act, non-spousal beneficiaries who inherited a 401(k) after 2019 are required to withdraw all the money within 10 years.
This is known as the 10-year rule.
Many people assumed this meant they could wait until the very end of the 10 years to take anything out, allowing the account to grow tax-free in the meantime.
But in 2024, the IRS clarified the rule.
Now, if the account owner passes away after their required beginning date (the age they were required to start taking minimum distributions), beneficiaries have to take annual required minimum distributions (RMDs) during those 10 years.
Here’s how it works: You’ll need to take yearly withdrawals based on your life expectancy – even if you don’t want to touch the money yet.
And yes, you’ll still need to clear the account out entirely by the end of that 10-year window.
But starting in 2025, beneficiaries affected by this rule must start taking annual RMDs – or risk facing penalties.
The good news is that the IRS is waiving penalties for missing RMDs from 2021 through 2024.
401(k) Contribution Limits for 2025
The contribution limit has increased to $23,500 in 2025, up from $23,000 in 2024. For workers aged 50 and above, there is no increase in catch-up contribution limits.
It remains $7,500 ($31,000 total).
Self-employed individuals with a Solo 401(k) may also contribute up to the new 401(k) limit of $23,500, along with catch-up contributions if eligible.
[Related Read: Retirement 401(k) and IRA Contribution Limits for 2025]
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