Exciting Retirement Savings Opportunities for Those Aged 60 to 63
If you will be between the ages of 60 and 63 next year, you’re in for a treat when it comes to your retirement savings options! This age bracket allows you to contribute significantly more to your workplace retirement plan, potentially boosting your financial security for the future. However, it’s essential to assess your financial situation, as some workers may find these increased contributions a bit challenging to manage.
Currently, federal tax regulations allow individuals aged 50 and over to make additional contributions, known as “catch-up” contributions, to a 401(k) or similar employer-sponsored retirement plan. For the years 2023 and 2024, this standard catch-up contribution limit stands at $7,500.
However, starting next year, a new provision under the federal Secure 2.0 tax law, enacted in 2022, will enable individuals in their early 60s to contribute even more. Specifically, those aged 60, 61, 62, and 63 will be allowed to make catch-up contributions of up to $11,250 next year. This represents an increase of $3,750 beyond the general deferral limit of $23,500 set for 2025, as outlined by the Internal Revenue Service (IRS). Consequently, eligible individuals could potentially contribute a grand total of $34,750 to their workplace retirement accounts.
This additional contribution option, often referred to as the “enhanced” or “super” catch-up provision, is designed for those nearing retirement who may not have accumulated sufficient savings. According to Dan Snyder, director of personal financial planning at the American Institute of Certified Public Accountants, individuals are eligible if they reach this age during the calendar year. It’s important to note that once savers turn 64, they will no longer qualify for this enhanced opportunity, although they can still utilize the standard catch-up contribution amount.
The primary goal of these provisions is to assist those approaching retirement age in boosting their savings, particularly for individuals who may feel behind in their financial preparations. As David John, senior strategic policy adviser at the AARP Public Policy Institute, notes, “This is a valuable opportunity to rectify past savings shortfalls.”
As the American population continues to age, increasing retirement savings becomes a pressing concern, particularly given the decline in the number of companies offering traditional pension plans. Alarmingly, an analysis of federal data conducted by the Economic Policy Institute and the Schwartz Center for Economic Policy Analysis reveals that the typical household headed by someone aged 55 to 64 holds merely $10,000 in retirement savings. This underscores the importance of taking advantage of available opportunities to enhance retirement savings.
