Hey ,
I want to tell you about some changes in 401(k) catch-up contributions for higher earners. These contributions are extra money you can save in your 401(k)
after reaching the regular limit.
In 2023, the
catch-up limit is $7,500, and you can choose pretax or Roth accounts. But in 2024, if you make more than $145,000, you can only choose Roth accounts that have no upfront tax break but grow tax-free.
In 2025, the catch-up limit will increase by 50% for workers aged 60 to 63, meaning they can save up to $11,250 extra.
These changes are part of a law to encourage more retirement savings. But some employers are having trouble updating their plans and are asking for more time.
So, how can you prepare for these changes? Here are some tips:
- Use pretax catch-up contributions in 2023 if you can. You will save more on taxes upfront.
- Set up a Roth IRA before the change. You will have more control and flexibility over your withdrawals.
- Review your tax situation and goals with a professional. They can help you with the best strategies and rules for your case.
- Stay informed and updated on the changes. Check with your employer or plan administrator about your options.
Call my office at 202-618-1297 if you need any help with your taxes or tax strategies. Otherwise, book a quick tax chat below.
