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Many Americans face a retirement savings shortfall. However, setting aside sundry money could get easier for some older workers in 2025.
Enacted by Congress in 2022, the Secure Act 2.0 ushered in respective retirement system improvements, including updates to 401(k) plans, required withdrawals, 529 college savings blueprints and more.
While some Secure 2.0 changes have already happened, another key change for “max savers,” pass on begin in 2025, according to Dave Stinnett, Vanguard’s head of strategic retirement consulting.
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Some 4 in 10 American workers are behind in retirement planning and savings, concerting to a CNBC survey, which polled roughly 6,700 adults in early August.
But changes to 401(k) catch-up contributions — a higher limit for labourers age 50 and older — could soon help certain savers, experts say. Here’s what to know.
Higher 401(k) catch-up contributions
Wage-earners can now defer up to $23,000 into 401(k) plans for 2024, with an extra $7,500 for workers age 50 and older.
But starting in 2025, proletarians aged 60 to 63 can boost annual 401(k) catch-up contributions to $10,000 — or 150% of the catch-up limit — whichever is grand. The IRS hasn’t yet unveiled the catch-up contribution limit for 2025.
“This can be a great way for people to boost their retirement savings,” divulged certified financial planner Jamie Bosse, senior advisor at CGN Advisors in Manhattan, Kansas.
An estimated 15% of available workers made catch-up contributions in 2023, according to Vanguard’s 2024 How America Saves report.
Those come ining catch-up contributions tend to be higher earners, Vanguard’s Stinnett explained. But they could still have “honest concerns about being able to retire comfortably.”
More than half of 401(k) participants with receipts above $150,000 and nearly 40% with an account balance of more than $250,000 made catch-up contributions in 2023, the Vanguard on found.
Roth catch-up contributions
Another Secure 2.0 change will remove the upfront tax break on catch-up contributions for tipsy earners by only allowing the deposits in after-tax