Nearly half of all Americans are anxious that they’re not saving enough for retirement, a recent survey from Jenius Bank found. Fortunately, upcoming changes outlined in the Secure Act 2.0 that are set to go into effect in January can help Americans better prepare for retirement.
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Here are the changes you need to know about, and steps you can take to take advantage of these changes to boost your long-term wealth.
Upcoming Secure Act 2.0 Changes That Will Help Americans With Their Retirement Savings
The Secure Act 2.0 will give a boost to Americans who want to improve their retirement savings outlooks, particularly those with access to 401(k) and 403(b) plans.
“The changes to 401(k) and 403(b) plans bring significant updates aimed at expanding retirement savings opportunities,” said Julie Guntrip, financial wellness expert at Jenius Bank.
Under the Secure Act 2.0, businesses that adopt new 401(k) and 403(b) plans must automatically enroll eligible employees, starting at a contribution rate of at least 3%, beginning in 2025. In addition, plan service providers can now offer automatic portability services to transfer low-balance retirement accounts to a new plan when employees change jobs.
“This benefits lower-balance savers who might otherwise cash out their savings instead of rolling them over,” Guntrip said.
For part-time workers, access to retirement plans is also improving. Under the previous Secure Act, employees with at least 500 hours of service over three years were eligible for participation in employer-sponsored plans. Starting Jan. 1, 2025, the service requirement will be reduced to two years, allowing part-time employees to start contributing to their retirement accounts sooner.
Changes to catch-up contributions will also take effect. In 2024, the limits are set at $1,000 for individual retirement accounts (IRAs) and $7,500 for most workplace plans, such as 401(k), 403(b) and 457(b) plans. However, beginning in 2025, the catch-up contribution limit will increase to as much as $10,000 for workers ages 60 to 63, with annual adjustments for inflation.
“This enhancement helps older workers save more during the years leading up to retirement, particularly benefiting those who may need to catch up due to a later start with saving or unexpected financial challenges,” Guntrip said.
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How To Take Advantage of the Upcoming Changes
Guntrip offered a few tips for Americans who want to take advantage of the upcoming changes outlined in the Secure Act 2.0.
Consider Increasing Your Retirement Account Contributions
“If your employer’s plan offers automatic enrollment in a 401(k) or 403(b) at a minimum of 3%, consider increasing your [contribution] rate,” Guntrip said. “Even a small bump in your contributions could make a big difference over time due to the benefits of compound earnings, especially if your employer offers a matching contribution.”
Roll Over Retirement Savings If You Switch Jobs
“For workers changing jobs, try taking advantage of the new automatic portability services,” Guntrip said. “If you have a retirement account with a former employer, you may now transfer those funds directly to your new plan instead of withdrawing them.
“Keeping your savings invested helps to avoid penalties for early withdrawal,” she continued. “And of course, keeping money consistently invested helps to reduce the risk of spending the money on non-retirement expenses.”
Start Contributing If You Are a Part-Time Employee Who Is Now Eligible for a Workplace Retirement Plan
“With the service requirement for part-time employees reduced from three years to two, part-time employees could be eligible to start saving sooner, potentially giving them a valuable head start on retirement savings,” Guntrip said. “Time is such an important factor in the exponential growth potential of investments, so an earlier start could result in greater earnings by retirement.”
Take Advantage of Increased Catch-Up Contributions
“Older workers, particularly those aged 60 to 63, should plan for the increased catch-up contribution limits, which will rise to $10,000 starting in 2025,” Guntrip said. “If you’re nearing retirement, this opportunity could help to close any gaps in your savings or prepare for future expenses by maximizing these higher limits.”
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This article originally appeared on GOBankingRates.com: Changes Are Coming To Your Retirement Savings in 2025: 4 Ways To Take Advantage
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