That might end up being the most important part of the legislation, because, as we’ve seen for 2023 adjustments of all kinds, inflation can have a huge impact on government formulas. Going forward from 2025, catch-up contributions will be indexed for inflation, so expect those numbers to rise considerably. It doesn’t have to be more complicated than that. Saving for retirement really just comes down to consistently putting money aside - as much as you can, to the best of your ability - and keeping at it. One way to cut through the noise about the rule changes coming is to concentrate on your savings and let the IRS and the tax professionals sort out the rest over the next year. Census Bureau, and less than 10% make more than $200,000. You’d have to make $225,000 for that amount to be 15%, which is the target amount many experts say you should put away for retirement. If you’re 60 and make $75,000, saving the full $33,750 contribution would be 45% of what you make in a year. The math is pretty clear if you look at salaries. “Since few participants - only about 10% - are constrained by the limits, raising them does not offer a broad-based solution for low saving rates,” the study concludes. The number of people who can contribute in the future beyond what’s already available will likely be even smaller.Ī study from the Center for Retirement Research at Boston College shows that past increases in the catch-up amount did not spur increases in retirement savings. Only 14% hit the maximum 401(k) amount altogether. Vanguard has found that only 16% of those currently eligible for catch-up contributions save the extra amount. So currently, it’s mostly high-earners who contribute the full amount that they can. One major hitch that holds up those currently 50-plus is that not many people hit the maximum amount you can contribute to a 401(k) and don’t get anywhere close to taking advantage of catch-up contributions. If you earn more than $145,000, your catch-up deferrals need to go into a Roth 401(k) option, so this will only pertain to those who have that option in their workplace plan. ![]() The amounts not only depend upon your age, but also your income level. The dollar amount allowed for that age group 60 to 63 is a formula based on the base amount for catch-ups and would amount to $11,250 at today’s rates, for maximum contribution of $33,750 (but likely more in the future). ![]() For 401(k)s, catch-ups are set to be $7,500 in 2023, on top of $22,500 that workers can put away, for a total of $30,000.īut when the new catch-up contribution limits start in 2025, there will be one set of rules for those 50 to 59, another set for those 60 to 63 and still another set for those 64 and older. The catch-up contribution for IRAs has been stuck since 2006 at $1,000, which can be added to a traditional or Roth IRA contribution of $6,500 in 2023. There’s one age and amounts that don’t usually change much year-to-year. If you’re 50-plus now, your choices are pretty simple.
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