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Retirement Savings SOS: Catch-Up Contributions to the Rescue with SECURE 2.0!

Posted April 28, 2023

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Picture yourself cruising into retirement, only to slam the brakes when you realize your retirement savings might not quite cut it. Wouldn’t it be fantastic if there was a magic number to ensure a financially secure retirement? While there isn’t a one-size-fits-all answer, you can use methods like the 25x rule to get a rough estimate.

You can learn more about the 25x rule to estimate how much you will need. Read more about that HERE!

But don’t fret if your retirement savings make you feel like you’re playing catch-up. The IRS has a superhero up its sleeve called catch-up contributions. This trusty sidekick is ready to help those aged 50 and over boost their retirement savings and get back on track. And with the new SECURE 2.0 legislation, catch-up contributions are getting an upgrade!

Catch-Up Contributions Unmasked:

Catch-up contributions are like a secret power-up for retirement savers aged 50 and above. They let you contribute more to your retirement accounts than the standard limits, giving you a fighting chance to bulk up your savings.

In 2023, the catch-up contribution limit for 401(k) plans is $6,500, which comes on top of the regular $22,500 limit. So, eligible superheroes can stash away a whopping $30,000 in their 401(k) lairs.

For IRAs, the catch-up contribution limit is $1,000, added to the standard $6,500 limit. This means our retirement crusaders aged 50 and over can sock away up to $7,500 in their IRAs.

Catch-Up Contributions and SECURE 2.0:

With the introduction of the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, catch-up contributions are getting an exciting makeover. Some fundamental changes include:

  1. Higher Catch-Up Limits: Under SECURE 2.0, catch-up contribution limits for 401(k) and 403(b) plans will significantly increase for individuals aged 62, 63, and 64. The new limit will be $10,000, making it possible to contribute even more to your retirement nest egg during those crucial years.
  2. IRA Catch-Up Contributions Indexed to Inflation: The catch-up contribution limit for IRAs will be indexed to inflation, ensuring that the limit keeps pace with rising costs.

These changes will provide an even greater opportunity for pre-retirees to maximize their retirement savings and make up for lost time.

Superpowers of Catch-Up Contributions:

Besides helping you make up for lost time, catch-up contributions have other superpowers. They allow you to maximize the tax benefits of your retirement accounts by reducing your taxable income, thus lowering your tax bill. Plus, catch-up contributions can speed up your journey to reach your retirement goals and ensure you have enough moolah stashed away for your golden years.

Activating Your Catch-Up Contributions:

To unlock the power of catch-up contributions, you must be at least 50 years old by the end of the calendar year and actively participate in a qualified retirement plan like a 401(k) or IRA. Just fill out the proper forms and submit them to your retirement plan administrator. If you need guidance or have questions about your eligibility, the team at Thayer Financial would be thrilled to be your trusty sidekick.

Make an appointment with our team [HERE].

Important Intel on Catch-Up Contributions:

Remember that catch-up contributions follow the same rules as regular contributions. For instance, catch-up contributions to a 401(k) plan must be made by the end of the calendar year, while those to an IRA can be made until that year’s tax filing deadline.

If you want to learn more about catch-up contributions , SECURE 2.0, or other retirement saving strategies, the Thayer Financial team is eager to join your retirement superhero squad. As a fiduciary, our mission is to work in your best interest 100% of the time. We’re proud to partner with you on your journey to prosperity and help you soar through every stage of life.

With the ever-changing landscape of retirement planning, it’s crucial to stay informed and take advantage of opportunities like catch-up contributions and the enhancements introduced by SECURE 2.0. These tools can provide the extra boost you need to reach your retirement goals and ensure financial security during your golden years.

Don’t hesitate to reach out to a trusted financial advisor or the team at Thayer Financial to discuss your retirement savings strategy. Together, you can create a personalized plan that takes into account your unique circumstances and financial goals. It’s time to unleash your retirement savings superpowers and secure a bright future for yourself and your loved ones!

Thayer Financial, L.L.C. (“Thayer Financial”) is a registered investment adviser offering advisory services in the States of North Carolina, Tennessee, Texas and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. This website’s presence on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by Thayer Financial in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or according to an applicable state exemption.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Thayer Financial, L.L.C., unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

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Hickory, NC 28602

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