Posted on Monday, November 11, 2024
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by AMAC, D.J. Wilson
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0 Comments
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Saving for retirement is a tricky business. If your company offers a 401(k) savings plan, take advantage of the opportunity to enroll, save, and let your money grow for retirement. Build your nest egg today – so that retirement can be a financially worry-free and comfortable time of your life.
Good news!
The IRS announced an increase in retirement contributions for 2025. This change can impact anyone with a 401(k) savings plan. There is also some valuable information that people aged 50 and up and those aged 60 to 63 who are saving for retirement should know. Read on to learn more!
What’s a 401(k) savings plan?
A 401(k) is a type of retirement plan offered in the United States. It is an employer-sponsored, defined contribution plan defined by the U.S. Internal Revenue Code.
What is the change for 2025?
For 2025, the IRS has increased pre-tax 401(k) limits by $500. This allows participants to contribute up to $23,500 – meaning that people can save more for retirement. While $500 might not sound like much, it is additional money that people can put into retirement savings pre-tax.
What do you mean by pre-tax?
Pre-tax refers to money taken out of one’s paycheck that does not get taxed at the present time. Rather, the tax due is paid later when it is taken out of the account.
What should people 50 and up know?
Catch-up contributions are extra contributions to retirement accounts that exceed standard maximum limits. The IRS allows catch-up contributions of $7,500 for people aged 50 and up. This lets people aged 50 and up put more money into their 401(k) plans.
What should people aged 60 to 63 know?
For 2025, the IRS allows catch-up contributions of $11,250 for this special age group who are involved in 401(k) work plans. This can help boost retirement savings for those who got a late start.
How do contributions work for a Roth 401(k)?
The IRS $500 increase in contributions for a regular 401(k) plan can be put in and grow tax free for those who take advantage of the opportunity. In the Roth version, the contributions are post-tax, but the money grows and is tax free when taken out. Unlike a typical 401(k), it is not merely tax deferred, it is tax free. When offered, participants can split their contributions between Roth and traditional.
In most cases, employers will match employee savings, thereby increasing the amount one can put away for retirement and watch grow. Unfortunately, studies show that less than 15 percent of people max out their savings plans, not fully realizing opportunities to watch their money grow for retirement. When chances avail, folks should try to increase the percentage of what they save – and seize opportunities to get their money to work for them so that they can retire with financial peace of mind.
Is it too late to begin savings?
While it’s optimal to start saving for retirement when you’re young, having some savings is better than none, so begin as soon as you can. By taking advantage of savings opportunities available to you, maximizing benefits, and being wise with your money, you can build a nest egg for your future.
Hiring professionals
This article is for general purposes only and is not intended as personal financial advice. For tax/investment questions or assistance, please contact a qualified CPA or financial advisor or visit www.mcwealthmgmt.com for professional guidance. Also visit https://www.irs.gov for more information.
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