How ‘catch-up contributions’ can help grow your retirement account
50 and over can now contribute $30,000 per year pre-tax
(InvestigateTV) — With new provisions in Secure 2.0 Act, which was signed into law last year, people age 50 and older can now contribute more to their retirement funds beyond the annual limit.
Starting in 2025, catch-up contribution limits for retirement plans such as 401(k)s and IRA accounts will increase from $7,500 per year to $10,000.
Michael Joyce with the financial firm Agili said this could help people set aside more money now for their future.
“If you’re over age 50, the time to check how much you’re putting in your 401k is now, especially if you’re looking to maximize your contribution,” Joyce explained. “Because you want to make sure it’s more even throughout the year, in terms of your 401K contributions.”
For an employer-sponsored plan, like a 401k, the Internal Revenue Service (IRS) standard contribution limit in 2023 is $22,500 a year.
For those over 50 who want to contribute more, the Secure 2.0 act allows an additional $7,500 per year. That means you can contribute $30,000 annually to your 401K.
Per IRS guidelines, 401k contributions are pre-tax, meaning funds will only be taxed when they are withdrawn for use in retirement.
For those without access to a 401k plan, the IRS has a comprehensive guide for how to open Individual Retirement Accounts (IRA).
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