SECURE Act 2.0: Catch Up Contributions

This is our fifth vlog about the changes to retirement plans under the SECURE Act 2.0 which became law in December 2022. You can find all of the other vlogs about other changes on our website. Today, we will talk about changes to catch-up contributions in your retirement plan accounts. There are two main changes to the catch-up contributions: the AMOUNT that you can contribute and the TYPE of catch up contribution.
Amount

For those who are over age 50, the “catch up contribution” allows you to add extra money to your retirement plan (401k, 403b, TSP, IRA) over and above the maximum allowed for everyone else. For 2023, this amount is $7,500 extra for workplace retirement and $1000 extra for IRAs and Roth IRAs. The workplace retirement plan catchup went up this year compared to last year but in the past, it has remained the same amount. The IRA catchup amount has stayed the same for many years. Starting in 2025, the maximum amount will automatically adjust each year indexed for inflation. 

In addition, starting in 2025, there will be an even greater catch up for those who are ages 60-63 and in an employer plan. They will be able to contribute $10,000 additional, or 50% of whatever the catchup amount is at that time- whichever is greater.

Type
Starting next year, in 2024, if you earn more than $145,000, you will be required to make any catch up contributions to after-tax Roth. If you earn less than $145,000, per year, you will be able to continue to choose if you want your catch-up contributions to go to pre-tax Traditional or after-tax Roth.
If you are over age 50 and maximizing retirement contributions, contact your financial advisor to see how these changes may affect your retirement savings plan.

This rule was supposed to be effective beginning next year, but now IRS announced it will provide a two-year “administrative transition period” (until Jan. 1, 2026) before plans must comply with the new law.

Adrianna Environmental B&W

Adrianna Rocha

Client Relations Specialist

240-379-6929 V
240-439-6889 VP
512-379-6909 FAX
adrianna@kramerwealth.com

Adrianna Rocha joined Kramer Wealth Managers in 2021.

Adrianna is responsible for client experiences and service. As part of the customer service team, she strives to help and provide top-notch service to our clients. As part of her role, she communicates with clients through videophone, schedules client meetings, prepares and processes forms, and gathers information for our advisors.

Adrianna Rocha graduated with a Bachelor of Arts in Communication Studies from Gallaudet University in 2017. Before she joined our team, she worked in the customer service industry for nearly a decade. She excels in human-to-human relations and takes pride in not only her own accomplishments, but her clients’ as well. Adrianna enjoys chatting about her slight obsession with dogs, houseplants, essential oils, and food: especially Mexican food! She is also a proud fur-mama to her beautiful Aussie-mixed pup, Ziva.

Adrianna is not registered with Osaic Wealth.