2025 Retirement Savings Alert

If you feel like you are behind on your retirement savings, there’s an even bigger opportunity to catch up in 2025.

Retirement Savings Crisis: America’s Current State

According to a CNBC Survey Monkey Your Money Retirement survey conducted in August, America needs to catch up on retirement savings.

40% of respondents report being behind on retirement planning at savings. 21% said they have no retirement savings.

Vanguard 401k Study: How America Saves

A Vanguard report released this year, called How America Saves, studied the savings behavior of roughly 5 million workers who have Vanguard employer-sponsored retirement accounts.

The average balance of a Vanguard 401k was $134,128. But, that balance is top heavy. The median age of plan participants was 43. Of course, workers could have retirement savings elsewhere in a former employer 401k or an IRA, but this the study also found that workers aren’t likely adding enough to those accounts. Just 24% of workers were contributing more than 10% of their income, and just 14% were maxing out their allowable contributions.

Secure Act 2.0: New Catch-Up Contribution Limits

Beginning next year, a provision in the SECURE Act 2.0 will kick that will increase the catch-up contribution limits for workers drawing close to retirement.

In 2025, the annual 401k contribution limit will increase by $500 to $23,500. For Americans who turn 50 in 2025, or are already 50, the catch-up contribution allows you to make an additional $7,500 in contributions.

The new rule will increase the catch-up contribution limit for workers age 60 to 63. Starting next year, investors in that age range can contribute an additional $11,250. That brings the grand total to $34,750.

Retirement Savings Opportunity: Catch-Up Contributions

This is a great opportunity for you if you feel like you’re behind on retirement savings.

A hypothetical example: if you added $34,750 a year to your retirement savings from age 60 to age 65, and assumed just a 6% rate of return, it could add more than $200,000 to your retirement savings.

Barriers to Retirement Savings: Addressing the Challenges

So why are we not doing that? The CNBC/Survey Monkey poll found that the top reasons workers are behind are debt, insufficient income, and getting a late start.

If that’s you, there’s nothing you can do about getting a late start. You can commit to using the increased catch-up contributions to catch-up.

Action Plan: Maximizing Retirement Savings

To do that, you have to deal with debt and income. Margin between those two numbers is the key to unlocking financial independence. You can’t save enough if everything you make goes out the door to expenses like debt payments.

Create a plan to eliminate debt. Work on advancing in your career. Create margin. Then, take advantage of catch-up contributions when you can. The opportunity is there.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance. Independent Advisor Alliance and GenWealth Financial Advisors are separate entities from LPL Financial.