This week’s theme on the Retirement Quick Tips Podcast is: SECURE 2.0 Act & The BIG Changes You Need To Know

Today, I’m talking about a key provision from SECURE 2.0 Act that applies to catch-up contributions for retirement accounts. Now listen closely, because this one is a bit complicated: 

Starting January 1, 2025, individuals ages 60 through 63 years old will be able to make catch-up contributions up to $10,000 annually to a workplace plan, and that amount will be indexed to inflation. 

Notice that this applies to people 60-63, whereas the current catch-up amount is for people age 50 and older and that amount is currently $7,500.

[example - maxing out 401k but you want to do more…]

And it doesn’t go into effect immediately, but starting in 2025. 

One other caveat: If you earn more than $145,000 in the prior calendar year, all catch-up contributions at age 50 or older will need to be made to a Roth account in after-tax dollars. Individuals earning $145,000 or less, adjusted for inflation going forward, will be exempt from the Roth requirement.

This caveat in the new rule applies to catch-up contributions for 401(k), 403(b), and governmental 457(b) plans, but not to catch-up contributions for IRAs, including SIMPLE IRAs, and 401(k) and similar workplace plans can include a Roth component, but they are not required to do so. 

IRAs currently have a $1,000 catch-up contribution limit for people age 50 and over. Starting in 2024, that limit will be indexed to inflation, meaning it could increase every year, based on federally determined cost-of-living increases. We don’t yet know what that amount will be or how much the catch up contribution will be, but the bottom line is that if you are already maxing out your 401k or IRA accounts, you’re over 50 years old and you want to do more, you’ll likely be able to do that starting next year depending on the types of accounts you’re contributing to and what’s allowed by your employer. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance