"Green Light to Contribute Aggressively": Advisor's Take on New 401(k) Plan Feature

As the new year begins, so do new opportunities for retirement savers. The IRS recently announced increased contribution limits for 401(k) plans, with the standard limit for employees rising to $23,500 in 2025, up from $23,000 in 2024. For those aged 50 and older, the catch-up contribution limit remains at $7,500. Additionally, a new feature is set to kick in, allowing employees aged 60 to 63 to make an even larger catch-up contribution, bringing their maximum contribution to $34,750.



These changes have advisors and financial experts excited, with many encouraging their clients to contribute aggressively to their 401(k) plans. "The new 401(k) plan feature is a 'green light to contribute aggressively,'" says Catherine Valega, a certified financial planner and founder of Green Bee Advisory. "With the increased limits and the new catch-up contribution for those aged 60 to 63, there's an opportunity for people to really boost their retirement savings."

The new feature, which allows for a higher catch-up contribution for employees aged 60 to 63, is particularly appealing to those nearing retirement. "If you're in your early 60s and you're still working, this is a great opportunity to really supercharge your retirement savings," says Valega. "You can contribute more now and potentially have a larger nest egg when you retire."



However, it's essential to consider your individual financial situation and risk tolerance when deciding how much to contribute to your 401(k) plan. While the new feature and increased limits offer exciting opportunities, it's crucial not to overlook other aspects of your financial plan, such as emergency fund savings and debt repayment.

"Before you start contributing aggressively to your 401(k), make sure you have a solid financial foundation," advises George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies. "That means having an emergency fund set aside and any high-interest debt paid off. Once you've taken care of those basics, then you can start thinking about maxing out your 401(k) contributions."



In conclusion, the new 401(k) plan feature and increased contribution limits offer an exciting opportunity for retirement savers to contribute aggressively and boost their retirement savings. However, it's essential to consider your individual financial situation and risk tolerance before making any decisions. By working with a financial advisor and creating a comprehensive financial plan, you can make the most of these new opportunities and set yourself up for a secure and comfortable retirement.