New Changes to Catch-Up Contributions
As October is coming to a close, we are awaiting the Internal Revenue Services’ (IRS) announcement of the 2025 retirement plan contribution limits. While the official amounts, indexed for inflation, have not yet been announced, we know changes are impending specifically to catch-up contributions. Originally rolled out in 2001, catch-up contributions allow employees, ages 50 and older, to make additional deposits into their tax-advantaged retirement savings accounts. The dollar amount is adjusted for inflation, although it may not change every year. The limit on catch-up contributions for 401(k)s for 2024, is $7,500 — the same as it was in 2023, bringing the total contribution limit to $30,500. For 2024, eligible taxpayers can contribute $23,000 to their 401(k) account up from $22,500 last year.
Starting in 2025 the new catch-up rule increases a participant’s catch-up contribution amount. Effective for the 2025 tax year, active participants, ages 60 through 63, can contribute the greater of $10,000 or 150% of the 2024 catch-up contribution limit which is indexed for inflation. In 2025, the total limit for 401(k) catch up contributions for those ages 60 to 63, is $10,000.
An account holder may take advantage of this additional catch-up contribution if they attain age 60 but are not older than age 63 by the end of the calendar year.
Annual employee deferrals to SIMPLE IRAs had a limit of $16,000 in 2024 but individuals, ages 50 or older, are allowed to make an additional “catch-up” contribution of $3,500, for a total of $19,500.
Beginning in 2025, there will be an increase in the catch-up contribution limits for participants who have reached ages 60 through 63. The new catch-up contribution limit will increase to the greater of $5,000 or 150% of the regular age 50 catch-up contribution limit for SIMPLE IRA plans in 2025. Cost of living adjustments will begin in 2026.
This is provided as a courtesy for informational purposes only. The information is correct as of October 21, 2024, but is subject to change.
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