What’s to Come with SECURE Act 2.0 in 2025: Key Changes and Impacts on Your Retirement

Posted November 1, 2024

The SECURE Act 2.0 is a major piece of retirement reform legislation designed to improve and expand access to retirement savings for Americans. Passed in 2022 as a follow-up to the original SECURE Act of 2019, SECURE Act 2.0 introduces new provisions that will come into effect in the coming years, with several key changes expected to impact retirement planning significantly by 2025. For business owners, these updates offer new opportunities to enhance retirement benefits for employees and reduce costs. Here’s a look at what’s to come with SECURE Act 2.0 in 2025 and how it could affect your financial future.

Automatic Enrollment in Retirement Plans. Starting in 2025, SECURE Act 2.0 requires employers to automatically enroll employees in new 401(k) and 403(b) plans at a default contribution rate of 3% to 10%.[1] This provision aims to increase retirement plan participation and boost overall savings rates. Employees can opt-out if they choose, but studies show that automatic enrollment often leads to higher participation and savings.

Expanded Access to Part-Time Workers. In the past, part-time workers often struggled to qualify for employer-sponsored retirement plans. Under SECURE Act 2.0, starting in 2025, part-time employees who have worked at least 500 hours per year for two consecutive years will be eligible to participate in their company’s 401(k) plan.[2] This expansion will provide more workers with opportunities to save for retirement, even if they work fewer hours.

Increased Catch-Up Contributions. For those nearing retirement age, catch-up contributions offer a way to boost retirement savings. Beginning in 2025, SECURE Act 2.0 increases the catch-up contribution limit for individuals aged 60 to 63. Currently, the catch-up limit for 401(k) and 403(b) plans is $7,500 (for 2024). In 2025, individuals in this age range will be able to contribute an additional $10,000, helping them grow their retirement nest egg during their final working years.[3]

Roth-Style Catch-Up Contributions for High Earners. Also starting in 2025, catch-up contributions for individuals earning more than $145,000 will be required to be made as Roth (after-tax) contributions, rather than pre-tax.[4] This shift may affect higher-income earners, but it also gives them the advantage of tax-free growth on their retirement savings in the future.

Emergency Savings Accounts Linked to Retirement Plans. SECURE Act 2.0 encourages employers to offer “emergency savings accounts” alongside traditional retirement plans. These accounts will be capped at $2,500 and allow employees to make penalty-free withdrawals for emergencies.[5] This provision, set to be fully implemented by 2025, is designed to help workers build a financial safety net without derailing their long-term retirement savings.

Simplified and Expanded Retirement Plan Access for Small Businesses. SECURE Act 2.0 includes provisions to make it easier for small businesses to offer retirement plans to their employees. In 2025, the act increases tax credits for small businesses that set up new retirement plans and reduces administrative burdens.[6] The goal is to encourage more small business owners to provide retirement benefits, increasing access for millions of workers.

Changes to Required Minimum Distributions (RMDs). Required Minimum Distributions (RMDs) are withdrawals that retirees must begin taking from their retirement accounts once they reach a certain age. SECURE Act 2.0 has already raised the age for RMDs to 73, but by 2033, the RMD age will increase further to 75.[7] While this change won’t take full effect in 2025, it’s important to keep in mind for future planning. Delaying RMDs allows retirees more flexibility in managing their retirement income and tax obligations.

Simplified Saver’s Credit. The Saver’s Credit is a tax credit designed to encourage low- to moderate-income earners to save for retirement. In 2025, SECURE Act 2.0 simplifies and enhances the Saver’s Credit, making it easier for more people to qualify and take advantage of this valuable tax benefit.[8]

SECURE Act 2.0 brings exciting changes to retirement planning, particularly as we approach 2025. Whether you’re an employee, employer, or someone nearing retirement, these provisions are designed to expand access to retirement plans, increase savings opportunities, and provide more flexibility in managing retirement accounts.

At CoSource Financial Group, we are dedicated to making a positive influence on a person’s retirement years by servicing our clients—one 401(k) plan and one employee at a time. We provide employers and employees with the fundamentals necessary to make educated decisions and encourage behavior that proactively prepares a person to save for retirement. Now is the time to review your retirement strategy, take advantage of these new rules, and help ensure you’re on track for a secure financial future.

[1] irs.gov
[2] retirement.johnhancock.com
[3] irs.gov
[4] fidelity.com
[5] dol.gov
[6] kiplinger.com
[7] irs.gov
[8] troweprice.com

Retirement plan withdrawals may be subject to taxation and penalties when withdrawn early. Employees who withdraw funds in a 401(k) plan before age 59½ may have to pay a 10 percent tax on any withdrawals, in addition to any regular income tax.

Jeremy Callegan

Jeremy initiated his career in the retirement plan industry in 2007, excelling in executing and managing corporate sponsored retirement plans at a local third-party administration firm. His expertise encompassed compliance factors such as plan design, non-discrimination testing, and annual Form 5500 preparation. Leveraging this experience, he strategically designed plans to minimize tax burdens and turnover, benefiting business owners, key personnel, and their workforce. In December 2014, he assumed the role of relationship manager at a prominent national record-keeper, overseeing 401(k) operations in Louisiana and Mississippi. Jeremy cultivated and sustained connections with 350+ financial advisors, managing 675 retirement plans and 20,000+ participants. Motivated to enhance proactive service in the retirement plan sector, Jeremy joined CoSource Financial Group in February 2017. Specializing in implementing or acquiring corporate-sponsored retirement plans, he prioritizes efficient plans for employers and effective solutions for participants. According to him, a well-structured retirement plan not only attracts and retains employees but also ensures a timely and respectable retirement through sound advice.