If you’re balancing a pension with additional retirement savings, 2025’s rule changes directly impact your options. Whether you’re a rookie still building out your financial plan or a veteran officer looking to maximize your final years of service, these updates change how much you can put away and how those savings work with your existing benefits.
Let’s break down what’s changing and what it means for you on the job. We’ll walk through each major update to retirement planning in 2025, focusing on what matters for first responders. Got questions about how these changes affect your specific situation? Reach out directly – we’re here to help you navigate these changes and more.
More Room to Save Ages 60-63
If you’re between 60-63, you can now put an extra $11,250 into your 457 plan on top of your regular contribution. That’s $3,750 more than the standard catch-up amount. Combined with your regular contribution limit of $23,500, you could save up to $34,750 in 2025.
Think of it like this: It’s four years of potentially enhanced savings abilities right when you’re typically earning the most.
Your 2025 457 Plan Numbers
Note: For ages 60-63, you get both the standard Age 50+ catch-up ($7,500) plus an additional $3,750, bringing your total catch-up amount to $11,250.
What This Could Mean for Your Wallet
How could these super catch-ups actually affect your retirement? Let’s look at a few possible scenarios: how your savings would look with super catch-up contributions, regular catch-up contributions, and regular but otherwise maxed-out contributions:
- Assumptions:
- A 6% annual return on your contributions, compounded monthly, to illustrate potential growth over time.
- Static contribution limits through 2025 and beyond (even though limits often adjust for inflation).
- Scenarios:
- Regular contributions only (no catch-up): Starting at age 50, contributing $23,500 annually until age 65, your savings could grow to approximately $648,375 by age 67.
- Using the standard catch-up ($7,500 annually for ages 50+): Adding this extra contribution each year, your total could reach approximately $855,304 by age 67.
- Using the new super catch-up ($11,250 for ages 60-63): During this four-year window, you’d contribute an additional $3,750 annually compared to the standard catch-up. By age 67, your savings could grow to approximately $875,737.
- Long-Term Impact:
- The four-year super catch-up window could add over $20,000 to your retirement savings by age 67 compared to using the standard catch-up alone.
- By age 87, with compound growth, that difference could increase to nearly $70,000—overall, that may not seem like a ton of money, but it could be enough to cover vital costs when people are at their most financially vulnerable – advanced age.
Note: Projections assume 6% annual return, compounded monthly. Past performance doesn't guarantee future results.
What About Preretirement Catch-Ups?
In the example above, we mention the ‘age-based’ catch-up for those 50 and up. However, there’s another kind of ‘catch-up’ you may not know about: In your final 3 years before normal retirement age, you might be able to contribute more than the regular limit – but only if you have “unused” contributions from previous years with your employer’s plan.
Say you put away $15,000 in 2024 when you could have contributed $23,000. That means you’ve got $8,000 in unused contributions. During your final three years before normal retirement age, you can mobilize these unused contributions on top of your regular ones.
Your Preretirement Catch-Up Game Plan
Step 1: Check Your Timeline
Step 2: Do the Math
Step 3: Maximum Allowed (2025)
IRA and Roth Limits Are Up Too
Not all firefighters have access to a 457 plan. Fortunately, there are still tax-advantaged methods to save for retirement, such as an IRA. Contribution limits don’t actually go up in 2025, but the income limits do. That means if you didn’t qualify for a full deduction last year, you just might this year.
2025 IRA Deduction Zones
Note: These limits apply when you're covered by a retirement plan at work. Different limits may apply for spouses without workplace plans.
For Roth IRAs:
Not all firefighters will qualify for full Roth contributions. If your income is below a certain threshold, you can contribute the full amount, but as your income rises into a specific range, the amount you can contribute begins to phase out, eventually reaching zero for higher earners. Understanding where you fall on the income scale is critical for planning. Fortunately, just like with Traditional IRAs, the overall income limits are just a bit higher than in 2024, meaning more people can contribute more to Roth than they could without any changes to their income.
2025 Roth IRA Contribution Limits
Note: Hit the income ceiling? Talk to us about backdoor Roth strategies - there could be a tactical approach available.
How Your 457 Works with Your Pension
Your pension is your foundation, but here’s something critical about your 457 plan that many firefighters don’t realize: You can access this money the day you leave service, regardless of your age, without paying the 10% early withdrawal penalty that comes with other retirement accounts.
This is huge for firefighters planning to retire before age 59½. Here’s why: Let’s say you retire at 50, but your pension doesn’t start until 55. That’s a 5-year gap where you need income. Your 457 can be that bridge – providing income during those years between hanging up your gear and when your pension kicks in.
Even if you’re planning a full career, having penalty-free access to your 457 gives you flexibility. Whether it’s an unexpected early retirement, a career change, or just wanting options, your 457 money is available when you need it.
What You Need to Do Now
- Check your current contribution rate.
- Look at your take-home pay – can you bump up your savings?
- If you’re approaching retirement, consider the special pre-retirement catch-up.
- Think about whether traditional or Roth contributions make more sense for your tax situation.
The Bottom Line
These new limits give you more room to save, but they’re just tools. What matters most is having a plan that works for you, your family, and your retirement timeline, and in any case, you don’t want to leave money on the table. Ready to make sure you’re making the most of these changes? Whether you’re early in your career or seeing retirement on the horizon, we get it – we work exclusively with firefighters and understand your unique benefits package inside and out.
Give us a call or click the button below. We’ll sit down, look at your specific situation, and build a plan that makes sense for you.
