Employers Raise Retirement Withholding Limits, But There’s Bad News for Savers
The Secure 2.0 Act became law in 2022 and provided ways to help more people save for retirement.
The law has provided employers with a number of retirement plan options, but not all provisions are implemented. Vanguard has been tracking how employers are using the provisions.
With its findings, employers prioritize programs that help employees build retirement savings for the long term but take a slower approach in other areas.
Good news: Donations to hold
The extended donation option was successful. This allows employers to increase the contribution limit for participants ages 60 to 63 from the standard limit of $7,500 to $11,250.
By the end of 2025, 91% of plans had opted into the upper limit, according to Vanguard.
The workers also benefit. Among participants ages 60 to 63 in plans that offer an enhanced feature, 21% increased their discretionary deferrals to $23,500, and more than 90% of those enhancers also made participating contributions.
About a quarter of tax savers direct some of their contributions to Roth accounts, suggesting a growing interest in tax-splitting strategies.
Bad news: Saving for emergencies
Provisions designed to help workers tap into their retirement funds during financial emergencies have had little success so far.
Just 4% of plans offered emergency expense withdrawals, allowing participants to withdraw up to $1,000 a year without penalty for unexpected needs. Only 0.4% of participants used this feature.
Self-certification of hardship waivers, which eliminates paperwork by allowing participants to prove they meet Internal Revenue Service requirements, fared worse in 3% of programs.
Availability of the domestic abuse waiver, a new category that allows victims to withdraw less than $10,000 or 50% of their balance without penalty, sits at 6% of plans. Usage remains low at 0.1% of participants.
Bad news: Portability and disasters
Automated portability has reached 7% acquisition by the end of 2025. This feature transfers small retirement balances to an employee’s new employer plan when they change jobs rather than allowing those dollars to be tied up or deposited into high-income individual retirement accounts.
Appropriate disaster recovery distribution saw a strong increase in 16% of systems. This allows participants affected by government-declared disasters to withdraw up to $22,000 without penalty and repay within three years. However, 0.2% of participants actually tapped this option.
What the provisions mean for your retirement
If you are between the ages of 60 and 63, there is a good chance that your employer has enabled an enhanced retirement contribution option. It’s worth checking to see if you can include up to $11,250 in withholding in excess of the standard deferral limit.
For employees who hope to use some of the new emergency access features, the lower the chances your plan is. However, these adoption rates are subject to change as more program sponsors assess the need.
Learn more about making the most of your post-career years in “6 Secrets to a Happy Retirement, According to the Experts.”
