Retirement Savings SOS: Catch-Up Contributions to the Rescue with SECURE 2.0!
Posted April 28, 2023
Posted April 28, 2023
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 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.
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:
These changes will provide an even greater opportunity for pre-retirees to maximize their retirement savings and make up for lost time.
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.
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].
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!
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