There are many factors that contribute to increasing one’s quality of life in retirement. Maintaining a healthy lifestyle, staying active and being engaged in social relationships are key components. Furthermore, finances and having sufficient funds to meet the lifestyle you’d like to have in retirement are also crucial.

A recent report from the Federal Reserve has shown that Social Security benefits are the primary source of income for 92% of retirees over 65, with only slightly more than half of all retirees having retirement accounts such as 401(k)s, 403(b)s, or IRAs.¹⁵ This reliance on Social Security is alarming, considering that the Social Security Trust Fund is projected to be depleted by 2035, potentially leading to reduced benefits for millions of Americans.  Even if Congress manages to avoid reducing Social Security benefits, the increased government spending to prevent this reduction will likely contribute to higher inflation, which in turn means the monthly social security benefits retirees receive will not be sufficient to cover their needs considering the rising cost of housing, food and healthcare. Therefore, it has never been more crucial to prioritize saving and contributing to retirement plans, such as 401(k)s, IRAs, and other investment vehicles, to ensure a diversified and sustainable income stream throughout retirement.

Data Source: Federal Reserve (2024). Among retirees sources of income include the income of a spouse or partner. DI is disability insurance.

Luckily, Congress has recognized the looming retirement crisis and has passed the SECURE 2.0 Act, which has made some changes regarding retirement savings rules to encourage individuals to save more.

As many of you are aware, there are rules and limits surrounding the contributions made to retirement accounts. For example, in 2025, an individual can only contribute $23,500 to a 401(k), 403(b), or 457(b) plan. Until now, individuals aged 50 and older were allowed to make a “catch-up contribution” of $7,500.

With the passage of SECURE 2.0, starting in 2025, individuals aged 60 to 63 are eligible for an increased catch-up contribution for a total of $11,250. This means:

• Regular Contribution Limit: $23,500

• Catch-up Contribution Limit: $11,250

• Total Contribution Limit: $34,750

Source: Fidelity

Taking advantage of the ability to contribute more towards your retirement savings offers significant benefits. Not only will it help you be better prepared for retirement, but it will also help lower your current year’s taxable income and potentially reduce your overall tax burden.

To learn more about maximizing your retirement savings, check out our webinar, ‘Navigating Your Retirement Plan’! As always, please don’t hesitate to Talk With Us if you’d like us to review your current retirement plan contributions or explore strategies for increasing your retirement savings and potentially reducing your taxes.

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