3 Big Retirement Rule Changes Are Coming in 2025—How They Could Affect Your Savings

With the new year will come new retirement savings rules.

On Jan. 1,, some new provisions of Secure 2.0, a federal retirement law, will take effect. These new rules could help you save more for retirement or force you to start withdrawing funds.

Here’s how they will affect your retirement savings and inheritance.

Older Workers Can Contribute Even More To Their Retirement Plans

Some older workers may be eligible to make larger catch-up contributions to their workplace retirement plans like 401(k)s and 403(b) thanks to new Secure 2.0 provisions,

Workers who are ages 60, 61, 62, or 63 will be able to make catch-up contributions of up to $11,250 in 2025, compared to $7,500 for all other workers age 50 and older.

Michael Griffin, a CFP at Henssler Financial, recommends that older workers who still want to save and have extra income to invest take advantage of the new rule.  

“If you have the capacity to save additional money, we certainly suggest you do that,” said Griffin. “If you already have quite a lot of money in your retirement account, perhaps the additional catch-up contribution is not that beneficial for you.”

Employers Must Automatically Enroll Workers In Retirement Plans

New rules will also require 401(k) and 403(b) plans to automatically enroll workers unless they choose to opt out.

Workers must be enrolled at initial rates of 3% to 10%. After that, the savings rate is increased by one percentage point each year until it reaches at least 10%, though it is capped at 15%.

“We certainly have a saving problem in the U.S., where younger employees don’t want to contribute to retirement accounts,” said Griffin. “You [might] start saving at 3% and look at that [account] five years down the road and say ‘Wow, this is benefiting me.’”

While the policy is meant to encourage people to save for retirement, some Vanguard research indicates that automatic enrollment and increases may not benefit workers who frequently switch jobs and don’t stay long enough to experience the benefits of the increased savings rate.

Inherited an IRA? You’ll Need To Take Required Minimum Distributions

In the past, people who inherited IRAs from their parents or grandparents could let the investments in that account grow over time, deferring taxes and taking distributions when they chose. The Secure Act eliminated these “stretch IRAs,” requiring people to take distributions over a 10-year period instead.

“If someone receives money from a parent, or really, anyone other than their spouse, that’s when these new rules come into effect,” said Brett Koeppel, CFP and founder of Eudaimonia Wealth. Spouses who inherit IRAs can still take advantage of the “stretch IRA,” though.

The rule only applies to those who inherited IRAs from people who passed away in 2020 or later. The IRS recently provided clarification on how these distributions will be taken out.

Starting in 2025, non-spouse beneficiaries of inherited IRAs must take distributions from their account every year until the end of the 10-year period, when the account must be completely emptied, explained Rob Williams, managing director of Financial Planning at Charles Schwab.

And if someone fails to take a distribution from their inherited IRA by the deadline, they could be on the hook for a penalty worth up to 25% of the undistributed amount.