SECURE Act 2.0: Higher Catch-up Limits for Retirement Savers.

If you are behind with your retirement saving or want to feather your retirement nest egg, SECURE Act 2.0 contains a few changes that will help you. Specifically, SECURE 2.0 increases the catch-up contribution limits for IRAs and employer sponsored [e.g. 401(k)] plans.

Beginning in 2024, IRA catch-up contribution limits will be indexed for inflation. Annual inflation adjustments will be made in increments of $100.00. So, beginning 2024, the catch-up limit for individuals who have attained the age of 50 will rise from the current $1,000.00 limit, to $1,200.00.

The second change affects certain participants in employer-sponsored plans. Under current law, an employee participating in a employer-sponsored plan who has attained the age of 50 may make catch-up contributions to their retirement account in excess of the applicable contribution limits. (The catch-up limit is $7,500 for 2023.) Starting in 2025, participants who have attained ages 60, 61, 62, and 63, may take advantage of an increased catch-up contribution limit equal to the greater of $10,000, or 150% of the regular catch-up amount. The catch-up limit will be indexed for inflation after 2025.

By way of example: Suppose the regular catch-up limit in 2024 is $8,000. 150% of that amount is $12,000 ($8,000 * 150%). Since $12,000 is greater than $10,000, an eligible plan participant (ages 60-63) would be able to make a maximum catch-up contribution to their account of $12,000 in 2025.

I hope you’ll be able to put this information to good use. As always, if you have any questions how these or other changes brought about in SECURE Act 2.0 will affect you, give me a call. I can help.