2025 presents an array of opportunities for people to strengthen their financial futures. New policies will go into effect that are designed to help those approaching retirement maximize their savings, reduce costs, and improve financial flexibility. From increased 401(k) catch-up contributions to a cap on Medicare drug bills, these changes may provide opportunities to save more for retirement or save on everyday expenses. 

Increased 401(k) catch-up contributions

Workers nearing retirement may be able to save extra to help reach their financial goals in 2025. The IRS increased limits on catch-up contributions this year: This means people ages 60-63, if allowed by their plan, can contribute $11,250 to their 401(k) account, versus the $7,500 cap for those age 59 or younger. 

The benefits of this increase are clear. According to Empower data, just over half (51%) of soon-to-be retirees worry about running out of money in retirement. The new catch-up contributions provide older workers with an opportunity to make up for lost time, or to supercharge savings near the finish line. 

Bumping up savings by even 1% each year can make a big difference in how much is saved over a lifetime, potentially adding thousands of dollars to retirement savings by the time workers are ready to retire. Taking advantage of catch-up contributions can make a major difference.

Read More: What is a 401(k)?

Medicare drug bill cap

Healthcare costs can be one of the biggest expenses for retirees, particularly for those who take prescription medications. It’s estimated that the typical 65-year-old couple may experience a 6% increase in healthcare expenses per year. Beginning this year, Medicare Part D will cap out-of-pocket costs for prescription drugs at $2,000. 

This cap is much lower than it has been in previous years, which is great news for retirees who had to budget in higher drug prices on a fixed income. The National Council on Aging estimates that 3.2 million Medicare recipients may enjoy lower costs as a result of the new rule.¹

It is estimated that a healthy 65-year-old man could expect to spend an average of $128,000 throughout the rest of his life (while women may spend $147,000).2 The cap on prescription costs may help reduce some of these expenses.

Social Security payment threshold holds

Some seniors opt to take Social Security before full retirement age (67 for those born in 1960 or later). Many are still employed while collecting benefits. Those who do are usually subject to a reduction in the Social Security payments, typically $1 for every $2 earned above the annual limit.

This reduction was capped at $22,400 in 2024 and remains so in 2025. This can be a major benefit for people who are towards the end of their working years but are not quite ready for full retirement, or for the thousands of Baby Boomers and Gen Xers “un-retiring” and returning to new roles or old careers.

Read more: Health insurance for early retirees: 8 options to consider when retiring before 65

Medical debt removal from credit reports

Medical debt will come off of credit reports beginning this year. Lenders will not be able to use medical bills as an indicator of a borrower’s creditworthiness, which the Consumer Financial Protection Bureau (CFPB) suggests may increase credit scores for those affected by an average of 20 points.³ This protection will also stop lenders from factoring medical information into their decision-making.

It's estimated that 100 million people in the U.S. carry a total of $195 billion in debt. This ruling may provide financial opportunities for people of all ages, but particularly for seniors who may have a broader medical history. 

Thrive in 2025

2025 presents a unique set of financial opportunities for older workers, offering a chance to strengthen retirement savings, reduce healthcare costs, and improve credit standing.

These changes represent tangible steps toward better financial health, helping older workers feel more secure as they transition into retirement. As this year unfolds, taking advantage of these updates could help ensure a more comfortable and financially stable future.