I don't see why. High earners/savers that have enough savings to leave the workforce at 59.5 really won't care, because enticing them with less than $4K/year for 4 years is nothing. They will either leave the workforce because they can, or stay in the workforce because they love their work.
If you're in a 401k or your own investments and do well, you care less about social security. Living life is more important than working in a cubicle farm day after day.
Sadly, by the time you're 61 - 63 years old, these additional contributions are pretty meaningless. You're technically very close to retirement, so the vast majority of your nest egg should be in place. Contributing a few thousand extra at this point, while helpful, is hardly game-changing. Honestly, if the government cared so much about retirement readiness, they should be incenting people in their prime earning years (35 - 55) to be contributing more. This is the time in your life where large contributions will matter most.
@@LeesaLilHop It's meaningless. If you have the ability to save extra in the last few years before your retirement, you may as well put it somewhere else, where it won't get taxed at the highest rate in retirement. You'll probably come out ahead in the long run, being able to better control your tax rate as you decide where to withdraw income from. Incentivize folks to invest when they're young, and this kind of silliness won't matter to them at all. This is a sucker's bet for all the older folks that haven't planned well, it's a governmental tax grab at your last few remaining bucks.
Every $1000 you have invested is $3.33 a month you can pull out if you follow the 4% rule. You are purchasing a future income. You tell me how many of those $3.33 income streams are meaningless in your account and I will gladly have them added to my account and I will treat them with love and respect. I do understand your point though. We should invest a significant portion of our income much earlier in our lives and not wait till it’s too late. I’m not worried about the government though. I don’t expect them to care about my family as much as I care.
At 61 I'm earning much more money now. So getting a tax break on a bit more income on the top end is worth it. Problem is that I think in 2026 that catchup won't be possible for a "high" earner. Roth 401K only. So if I read this right I'll only be able to take advantage for 1 year.
I wanted to argue against this, but call it 6k/year, so that becomes 18k extra at a 67 retirement that's $22,000 (4k 'profit') If you assume someone lives at the 12% tax bracket for all of their retirement income that's a take home income of $19,360 from their 401k 'distributions' If someone was going to be able to save this much away in a taxable brokerage account it might be at 24% tax brackets so - 4560 instead of 6000 So in a taxable brokerage account that'd make 16411.67 at 67. (Assuming profits also taxed at 12% tax bracket) 19,360 - 16,411.67 = $2948.33 Assuming the 4% rule on that money and you've got a nice $9.83/month extra to live on. If 4.1 million retire each year and 14% of them max out their 401k. that 574,000 people that might have taken advantage at $117.93 a person we're looking at a 67.7 million dollar tax loss for the US economy. Assumption: 7% YOY Rate of Return over a 7 year horizon & Not accounting for any state taxes
when someone is straight forward and good at what she does best. People will always speak for them. For me I can would say give Mrs Jenna Brooklyn of finance education a try and you be happy you did
Back when I was in my early 60's I did max out my Roth IRA and my 401K with catch up contributions. I still haven't touched any of it but will soon with my 401K. Great video again as usual Erin!
Great video as always. One note I would like to throw out there. If you are contributing to a 401k, you should bear in mind the maximum percentage can be a problem if you make enough to reach the limit before year end. Your employer will make sure you don't go over and stop your contributions. However, if this happens, the rest of the year you'll miss out on employer match. So it's best to do the math and contribute the right percentage so you max out only at year end.
@@Larry-d1c um I don’t know about your 401k plan but with mine, once you hit the max, you still can contribute it just goes in post tax instead of tax deferred.
A great point! Absolutely essential! I took the max amount allowed and divided it by the number of pay periods in the year and that was what I had withheld every payday.
I thought this was the case as well, and have always lowered contributions so I don't quite max out. We'll, I got too much ot last year and learned that my company still deposits 4% even after I maxed it out.
I always enjoy the straight forward way you explain finance in a way that is clear to non-finance people. My situation is very fortunate as I am eligible to be in a 401K and a 457B that status of being government and non-government at the same time has been game changing in growing my retirement accounts. Whatever your age always remember to pay the future you the most you comfortably can.
Thank you for also mentioning the federal TSP! BTW... You do a great job with the graphics, making complex financial topics easy to understand. Keep posting your bloopers. I really enjoy them 🤣
For me, the maximum "catch-up" always seemed worth it. At that age I was earning more and my children were costing me less as they completed college and left home (my payroll). Therefore, I had more money available to contribute. The "catch-up" savings is the last money I will take out of retirement. It will be in the market for 20 to 40 years assuming I live to 90+. Thanks for another great video. I continue to send friends a link to your channel hoping you can gain more subscribers.
Catch up eligibility should be any roth or traditional amount that has not been maxed out in any previous year. Let everyone at any year go and back fund all that missed opportunity.
That's a spreadsheet I have for me and my wife. I pulled up the Roth IRA contribution limits per year and beside that I put the annual total returns of the s&p 500. Then I have two columns one for the total Roth IRA contribution I should have made since the 90s and the other column that compounds the running total returns on the annual returns/losses of the S&P index. I've contributed about half of what I could have since the 90s and I do regret taking out for a first time home. Looking at the total calculated balance plus returns of $400k of my balance alone makes me nauseous. We can't afford to max out both of our workplace retirement accounts but our goal is to at least catch up to at least the contributions we missed since the 1990s plus current contributions and any extra we can put in. We won't have the $400k from mine plus my wife's ($380k ? Can't remember) at retirement because we missed out on all of those years of compounding, but at least we'll have more than we started with.
Thanks for the presentation! Helpful. I especially liked the tidbit about how much you could end up ahead by front loading your IRA each year (investing in January versus December).
Erin you REALLY should do another video on self-employed 401k plans. The 2024 self-employed contribution limit is $69,000, or if eligible $76,500 with catchup. After retiring early at 56 with a nice employer 401k nest egg accumulated starting at age 35 I went to work as a consultant. My specialty field is very narrow, so not much competition. Over the next 20 years I worked hard, but enjoyed that work quite a bit, and contributed the max into my own LLC 401k almost every year. It helped that the company I retired from was my major client for the first 10 years. Of course, the max was much lower at the beginning. I set myself up as the plan administrator and hired an advisor to manage the funds, all fully invested in a stock portfolio. At retirement I rolled the 401k over to an IRA to put an end to IRS self-employed 401k reporting requirements. Now my RMD from that one fund is over half my retirement income. This is a great way to go if you have the opportunity.
I've maxing out my TSP since age 50 (12 years). It has reduced my taxes significantly. In addition, when I run my retirement numbers, i will still be in a lower tax bracket for the rest of my life. Roth when you are younger, and Traditional when you age and loose deductions. You are right on target with your advice!!
Hi Erin. Good video and discussion today and should be beneficial to those who can see it's benefit and have the ability to take advantage of it. The bloopers/out takes were good as usual ... I noticed those pesky birds were getting to you again 😉 Have a good week and I'll see you on the next one. Larry, Central Valley, Ca.
The life expectancy of a 60 year old non smoking white male in the USA is 81. So on average those catch up contributions still have 20 years of growth/life in them. While it would obviously be better to get that invested sooner, with 2 decades of life in front of you I do not see that as meaningless. If you have a spouse and you are not planning on dying at the same time you can push these contributions to Roth accounts and lessen the impact of the inevitable tax bomb. My and my wife's families have very different histories when it comes to longevity so this is something i think about. If you are using Roth accounts as an estate planning tool that is another chunk of money that will have less headaches for your heirs. Given that a minority of people can regularly max out all these contributions, this feels like a lot of window dressing anyway.
I have been retired for 12 years now. The increase of the CPI has been about 35% while the increase of the 401k limit with the catch-up amount is about 100%.
Hello Erin, I’m an RN and I really really enjoy your videos. They are so helpful and very informative. I NEVER skip any advertisements. This the only way we can pay back your sacrifices. Btw, I have to be honest with you. There are times that It’s really difficult for me to concentrate to your videos like this. Do you know why? It’s because you’re so pretty.
You may want to consider In-Plan Roth Conversions. Pre-Tax funds become Roth funds. You have to pay income tax on the amount converted. Just be sure *NOT* to pay the tax out of the converted funds -- if you do you'll have to pay a 10% penalty because the funds were withdrawn from your 401(k) account (if you are under Age 59 1/2). Pay the tax with what financial advisers call "other resources," i.e., After-Tax money outside of the 401(k) account.
I'm really surprised they added just to 61-63.... it'd be such easier branding to just do something like 50+ gets an extra $5000 catchup 60+ gets an extra $10,000 super catchup that phases out at 65 or 70 or something. It'd make more sense, and be less arbitrary. That being said I'm absolutely shocked at how high the percentages of 14% for 401k and 22% for IRAs are. I really wish they'd share how much of that is overlapped. Is that 14% who do both, and 8% who also do IRAs for example or some other number.
The overlap is likely fairly small since there's an income limit for being able to contribute to both (and still get tax advantages), and earners under the limit will have a harder time saving the funds to contribute the maximum to both.
Throughout my entire working career I "paid myself first" and maxed out my 401k and IRA. I put the year's IRA money into the account in January. One year I wrote the check too soon and it was returned to me, telling me I had to wait until January 1st! And I put ALL the money into the stock market until I retired.
Just watch it if you do your withdrawals at the start of the year!!! My Wife’s Company does an Employee Match and we Greatly Appreciate it but, they want to be sure you put 5% away every month so, if you don’t put it away (because you have already maxed out for the year) you don’t get their match!!!
Some 401(k) plans have a "true-up" provision. If your wife's plan has it, if she put away 10% during the first 6 months of the year, she would get the match on 5% as she went along for the 6 month, and the additional 5% at the end of the year. (Or perhaps even as you go along.) The easiest way to find out is to call the 401(k) Plan Administrator and ask the nice representative whether the plan has a true-up provision.
P.S. If the 401(k) plan does not have a true-up provision, then you are absolutely correct -- your wife must do a minimum of 5% every paycheck to get the full benefit of the match. I should probably point out that 10% is likely *NOT* enough to enable you to retire comfortably. It's sort of a trap that people contribute only what gets matched. If your wife is maxing out her contribution and getting 100% of the employer match, that's great. What people need to do is to learn how to do Time Value of Money (TVM) calculations, calculate the amount they need to have saved by the desired date, and contribute enough to reach that goal.
@@brucestiles6477 Agreed. All the plans I’ve seen had true-up provisions. I haven’t seen one that would true-up as the year goes on (that makes too much sense), but instead around July of the following year after the annual 401(k) IRS filings are submitted. In my experience, companies will do true-up even after you’re no longer employed since you had already “earned” the matching.
It'll be a great year! Between my wife and I we can get $69,500 in tax advantaged dollars and that makes me smile 😀 If we add the match we'll get, that'll be well over $80k next year! We love the backdoor Roth, now if only my employer would allow the Mega backdoor!! Haha. Great recommendation on fully funding your IRA in Jan, we do it each year! There's about a 0% chance I'll be working when in 60 🤣
This late career increase is more of a marketing gesture than a change that will have anything close to having a significant impact on retirement income. The only significant impact it will have is on keeping people in the work force where they will still be paying into SS and Medicare. It would be far better to increase tax deferred savings limits in all age groups.
Great graphics, as always! With such a variety of retirement accounts, each with its own set of respective applicable limits, how do the contribution limits apply to someone with, for example, both an IRA and a 401(K)?
Well it does help those who start their employment in the 40s to maximize investing. As much as many may complain someone will benefit from this change. I for one will not bite for an additional 16k for the freedom of using MRA+ 10 in my fifties. Thanks again.
the gov should have just made it for age 50 and up this increase in catch up. how many people are saving now and at age 61 -63 - you might not even be working - a lot of ageism in the workplace- just another tax grab by the gov
Catchup contributions also do not count toward 415c limit. 415c limit for 2025 increased to $70k. So, you could contribute upwards of $81,250 minus employer match, if you are 60-63yo if your employer allows employee contributions toward 415c. The IRA section made it looked like you could do $7k tIRA and $7k rIRA rather than $7k being the combined IRA limit.
The key point being made here is that everyone should be working towards maxing out their 401k contributions. It is a big tax advantage for you, and you will notice big jumps in your overall balance once you reach that point. Don’t just do the employer match. Keep increasing your contributions every year no matter what. Your future self will thank you.
I've been trying to max out my Roth IRA, but my 401k is not maxed out. I'm kind of close to it, but it's tough to invest that much money. I'm hoping in the future I'll be able to afford it. I think increasing the contribution limit is great. Any help or increase is good I would think. If people can afford to do it that's a great benefit. I also agree with people in the comments that trying to help people in their prime working years would be a nicer benefit cause they'll have time for compounding to help.
Retirement accounts lagging taxable accounts heading into the final planned working year of 2025. Quite happy to get at least one year of the increased limit in 2025. Every little bit helps.
I can see this being useful if an employee can contribute to the Roth version of one of these employer-sponsored retirement plans, since there are no RMDs on Roth accounts. If their only option is a Traditional plan, I wouldn't bother and would instead put the money into something else (e.g. brokerage account) because of the risk of higher RMDs in the future. However, this extra money put into Traditional accounts might make sense if it was incorporated into a clever Roth conversion plan.
The Secure Act works perfectly for me. I make a great deal of royalty income (untaxed) during the year so the more of my job's salary I can tax defer the better. I plan to max out next year (age 62) and the year after (age 63) with an eye on retiring at 66 and a half.
People need to be careful if they are accelerating their contributing to the 401k early in the year. If you do too much too early then you might miss out on full employer matching. For example - say your employer fully matches the first 5% of your contribution and has a maximum limit of $5000 per year. If you are earning $120K per year (paid once monthly) and decide to contribute the full $23.5K in the first 3 months, you will only be able to collect $1,500 of the free money (i.e. Employer match) before you have hit the max for the year and your employer will stop matching. In this scenario you should plan on splitting out your 401k contributions till October to collect all $5000 that your employer will match. Conclusion: Early contribution is good but it should still be spaced out enough to collect the very last dollar that your employer matches.
Maxing out your IRA early in the year can have drawbacks. Such as losing your income source and not earning enough to support the maximum contribution amount, or switching jobs to employer that has a 401(k) and contributing to both when you may end up not being eligible to contribute to both.
I'm 2 years away from retirement but don't think I can contribute more to my 401k. I feel like I need a bigger cash bucket than I currently have so will be putting most everything into that effort.
According to the last Vanguard study only 13% of plan participants max out just the base contribution amount, let alone any "catch up". Most people who are short on retirement at a late age have a behavioral problem when it comes to savings and increasing the catch up limit isn't going to address that.
Any increases in limits are welcomed. I appreciate the honest reason being the IRS wants to optimize revenue gains. I do not think they have a logical leg to stand on in terms of not pushing limits higher because of inequality. I really don’t think the IRS or Congress cares. How about letting lower income earners decide how much they want to contribute if you truly value citizens. Maybe more citizens could become less reliant upon SSB - no never mind, of course they won’t haha. What I would love to learn is the WHY Americans are not contributing nor maxing out on these accounts. Is it lack of education? Yup. Is it recurring expenses matter more to them? Yup. Is it not living below one’s means? Yup. Do I think Congress should therefore talk about getting rid of Roth etc as a result? Nope! Sorry for being negative; it just seems that we - including Congress - are focused more on the current balance sheet than longer term planning. I welcome future videos discussing these topics 😊 Thank you for bringing such an inviting spirit to these topics. Cheers Michael Amir
We able to max out my wife's 401k and with the growth of her investments it made a significant difference to her final retirement account compared to her work mates.
If you use the opportunity to max your contributions into the Roth IRA and 401k's at age 60 to 63 then you are likely to successfully see it grow as those accounts are usually drawn upon later in retirement.
I am coming to the limit that I can put in my 401k because of other deductions. I'm semi retired now and I am putting in 55% of my paycheck into my 401k but only work 1 or 2 12 hour shift days a week. I have to leave money for my other benefits and income taxes. I am still working because my employer has me working part time but I get full time benefits and getting health insurance in your mid 50s is very expensive.
Would like to see who actually falls into this band with metrics, how much they have saved and their salary to max out. Won’t you just end up taking the money out when you retire at say 65? Would it be better to do Roth conversions with the money, assuming you have been saving. I would think you have other bills at this point as well and tough to save 35%, saying making 100k/family. Home costs, repairs, improvements, vehicles, kids college, etc. Hopefully these new limits are helping someone.
I would be interested in learning how employer matching *Roth* contributions "work." Are they included in an employee's W-2 income? Does the employer have to forego taking a tax deduction on Roth 401(k) matching contributions?
All employer matching amounts are required to be traditional, regardless of whether the employee’s contribution was traditional or Roth. Employer can deduct the match as a business expense. The match is not included on employee’s W-2. Employee will owe income tax when withdrawing funds derived from the employer match.
What are the income limits to 401K and catch up contributions in 2025 and 2026? My understanding is that in 2026 the catchup for "high" earners will have to be Roth 401K. Yes?
I think if I were to max out my 401k when I am 60, I would not know to decrease the amount when I turn 64. How much do I loose to penalties in that case?
We are financial mutants and we search for more and more ways to save. We are saving between 40-45% and wish we had more tax incentivized ways to put more away. -- And as always, I love my 'Erin's Errors' at the end of the videos. I never saw or heard a bird or a plane. LOL :P ~~~
Weird coincidence, but that sorta helps me with plan/road I’m on. If only I’d listened to my gut years ago. True story, I’ve always been into computers. Building them and such as a hobby. So I knew about nvidia graphics cards way early on. I thought then, you should buy a few shares of that, they’re sorta the only game in town. I think they were trading around $45-$50 at the time. I thought that would be a good investment, but of course I didn’t 😂😂😂
Catch-up contributions always struck me as a lazy attempt to address the fact that most people are saving nowhere near enough to retire. Time in the market is most important and if you're relying on catch-up contributions, you're already too late. Extending more catch-up contributions into the 60's is an indictment on the poor financial health of Americans. Those who need more at that stage likely can't hit the standard 401k limit, let alone the 50+ catch-up, or the new catch-up. Let's be real: this will be used by people who're already set for life funneling more in because they can. Most people simply do not have the means to save for retirement between rent, student loans, etc. Young people today will never own a home, let alone have the means to set aside money for retirement. Worse still, no way Social Security will exist by the time we're in our 60's.
The catchup contributions are nice but I am thinking for most people have yet to max out their accounts. Its people like me that will benefit and I have been funding my 403B for almost 27 years. Although it did take me a while to get to the max out amount. I also turn 60 next year. So the question is can I max out my account in the year I turn 60? Also I don't plan on retiring until at least age 70 but although I am shooting for 75.
I file jointly and make over the Roth limit. I’ve been contributing to the Roth for the past 2 years. Just found out about the limit. How do I move the money out of the Roth to another investment without a tax penalty?
were you over the income limit or within the phase out the past 2 years? If you are over the income limit, you have until tax filing deadline to fix the error. You have to either withdraw the ecess contribution along with returns (earnings in this case are considered income since they aren't eligible to be sheltered in the Roth); you can reacharacterize the excess to plus gains into a tIRA; or you can apply forward the excess contributions to future rIRA contributions. This invokes a 6% annual penalty, though, until you have corrected all excess contributions and earnings. If you past the tax filing deadline (e.g. since you've been contributing past 2 years), you owe 6% penalty on excess contributions every year until you correct the excess problem. You'll need to file Form 5329 Additional Taxes on Qualified Plans (Iincluding IRAs).
...but you got to let it grow to have it be useful. You need the time. Using 60-63 will probably not give it enough time to grow UNLESS you have other accounts to tide you over.
This is certainly not something you can dwell on but somehow it seems particularly relevant at the moment: how can one be comfortable making projections about “average market performance” with S&P at 6K? The risks and opportunities one sees for their nest egg is the biggest challenge in retirement savings. You can do well not understanding the risks but the continued upward trajectory of the stock market is not guaranteed and the continued “average performance” isn’t a good assumption in my opinion. A market like the one we have had creates the impression that equities are ‘safe’ and the Fed lowering interest rates will encourage more investment in equities. If (when) it does crash, the pain will be felt as extraordinarily as the exuberance has been for this last 10 years of almost uninterrupted upward movement.
@@hanwagu9967 they have been saying that, you’re right. I don’t think that is an argument to be optimistic about what the market may do next though. The market is still cyclical - we haven’t eliminated the potential for bear markets because it is the product of human nature
If your 401(k) plan contributions are being done by payroll deduction, your employer should automatically stop your contributions when you've hit the max. The final contribution would be less than the usual amount because it hit the limit. Ask your payroll people. If you have a "Solo" -- a plan for a business owner and spouse -- you are in control of the amount that you contribute, so that would be easy.
A whopping $500… Don’t get me wrong, something is better than nothing. But it could have gone to say $25k. I know that’s tough in my age bracket 35-55, but it would have made a much bigger impact.
I'm trying to understand why this is a big deal. If you have enough money to actually take advantage of the extra four thousand dollars in contributions. And you did that 4 years. How much extra impact is this really going to make for you?
The problem with the 401k is that you think this is your money, but in reality you have a silent partner - the government - who considers your 401k as "our" money. The people who are most capable of making the catch up contributions are going to be the higher income earners. By making these catch up contributions, these folks will be hit harder by the "RMD stick" once they turn 72. Heaven forbid if you work into your 70's continuing to sock away money in your 401k, the RMDs will be that much larger. If you're turning 60 in the next few years, you'd probably be better off paying the taxes and investing in a post-tax account. Then use this to fuel your annual Roth IRA contribution.
Or use the Roth 401k moving forward. I know that wasn’t available for boomers most of their career, but as a GenXer, I’m taking full advantage of the opportunity. You can still use this for catchup contributions.
@@chemquests The Roth 401k is a good option is your employer's plan offers it. Especially in your early working years. Just remember to roll that Roth 401k into a Roth IRA when you separate from your current employer. Current rules have RMD's on Roth 401k's but not on Roth IRAs. Although I keep reading that the RMDs for Roth 401k's will be going away. Just something to keep an eye on. I'm turning 60 next year and am trying to sort this out.
@ yes indeed. I’m 48 and been with the same employer the whole time. We’ve had the Roth option about 5 years, so I’m still heavy traditional. I’ll definitely be rolling it over and doing a bunch of conversions when the time comes.
All I heard was the limits are so low because government is huge and needs the tax revenue 😂 Sounds like if we cut government our contribution limits should go up.
What did the mother tomato say to the baby tomato after the mother tomato stomped her foot down on the baby tomato? "KETCHUP" Your message reminded me of this joke.
Nice but seriously, at 60-63, that’s only 4 years of an extra $4k above the normal catch up, so an extra $16k total. Unless you aren’t retiring until like 70 that’s almost no time for that money to really grow to benefit you particularly well… kind of silly. I think that it’s a stop gap by the gov because they see how little so many people have saved… but hey I’ll take any opportunity to shovel more money away into retirement (although I’m planning to be done at 62, so limited opportunities for me with this extra… 10 years to go, I can’t wait! I’m soooooo sick of working and dealing with all the nonsense… I’ve been maxing out my 401k contributions every year (plus the catch up now) for at least the last 10+ years and was putting in a pretty good amount before then. So I’m in good shape, particularly since I’m single with no kids. I’m projected to take home more in retirement than I do right now while working!
@ yup. It definitely helps me already… me before tax income is roughly $150k but with maxing out 401k plus the catch up, plus other things like healthcare flex spending, it drops my taxable income below 100k..
What are you going to do with all that money invested when you are 65, sick and tired and can't enjoy all that saved money anymore? So you invested all those years and restrained yourself from enjoying a good life just to die a few years after retirement and leave your whole investment to others that might not deserve it 😢
I'm 78, an active private pilot, still taking several international vacations every year, and generally enjoying life. I can do all that because I played a long game with my savings. Try a more positive outlook. It may help you live longer if you have a plan for what happens after 65.
![เจ็บที่ยังฮัก - ม่อน วรวิทย์ [ Official Mv ] จอนนี่มิวสิค](http://i.ytimg.com/vi/KALIGSRSjFs/mqdefault.jpg)
it's an obvious ploy to get high earners/savers to stay in the workforce beyond 59.5, thus continuing to add to the tax base for Social Security.
I don't see why. High earners/savers that have enough savings to leave the workforce at 59.5 really won't care, because enticing them with less than $4K/year for 4 years is nothing. They will either leave the workforce because they can, or stay in the workforce because they love their work.
A pretty poor incentive.
If you're in a 401k or your own investments and do well, you care less about social security. Living life is more important than working in a cubicle farm day after day.
@ that’s exactly my point
A good point, sweetening the pot a little bit to provide a subtle incentive. It is pretty smart from the IRS
Almost at the first 100k Erin!!
What’s your age?
Good job!
@@dunemeshe is talking about subscribers
The first 100k subs are the hardest ;)
Sadly, by the time you're 61 - 63 years old, these additional contributions are pretty meaningless. You're technically very close to retirement, so the vast majority of your nest egg should be in place. Contributing a few thousand extra at this point, while helpful, is hardly game-changing. Honestly, if the government cared so much about retirement readiness, they should be incenting people in their prime earning years (35 - 55) to be contributing more. This is the time in your life where large contributions will matter most.
If you need it, then you need it. Its not meaningless, you simply wont have much growth.
@@LeesaLilHop It's meaningless. If you have the ability to save extra in the last few years before your retirement, you may as well put it somewhere else, where it won't get taxed at the highest rate in retirement. You'll probably come out ahead in the long run, being able to better control your tax rate as you decide where to withdraw income from. Incentivize folks to invest when they're young, and this kind of silliness won't matter to them at all. This is a sucker's bet for all the older folks that haven't planned well, it's a governmental tax grab at your last few remaining bucks.
Every $1000 you have invested is $3.33 a month you can pull out if you follow the 4% rule. You are purchasing a future income. You tell me how many of those $3.33 income streams are meaningless in your account and I will gladly have them added to my account and I will treat them with love and respect.
I do understand your point though. We should invest a significant portion of our income much earlier in our lives and not wait till it’s too late. I’m not worried about the government though. I don’t expect them to care about my family as much as I care.
At 61 I'm earning much more money now. So getting a tax break on a bit more income on the top end is worth it. Problem is that I think in 2026 that catchup won't be possible for a "high" earner. Roth 401K only. So if I read this right I'll only be able to take advantage for 1 year.
I wanted to argue against this, but call it 6k/year, so that becomes 18k extra at a 67 retirement that's $22,000 (4k 'profit')
If you assume someone lives at the 12% tax bracket for all of their retirement income that's a take home income of $19,360 from their 401k 'distributions'
If someone was going to be able to save this much away in a taxable brokerage account it might be at 24% tax brackets so - 4560 instead of 6000
So in a taxable brokerage account that'd make 16411.67 at 67. (Assuming profits also taxed at 12% tax bracket)
19,360 - 16,411.67 = $2948.33
Assuming the 4% rule on that money and you've got a nice $9.83/month extra to live on.
If 4.1 million retire each year and 14% of them max out their 401k.
that 574,000 people that might have taken advantage at $117.93 a person we're looking at a 67.7 million dollar tax loss for the US economy.
Assumption: 7% YOY Rate of Return over a 7 year horizon & Not accounting for any state taxes
*I'm glad you made this video* it reminds me of my transformation from a nobody to good home, $34k monthly and a good daughter full of love..
when someone is straight forward and good at what she does best. People will always speak for them. For me I can would say give Mrs Jenna Brooklyn of finance education a try and you be happy you did
Started with 5,000$ and Withdrew profits
89,000$
I'm glad to write her tay I do hope she will help handle my paycheck properly☺️☺️☺️
Can I start with as low as $1,000?
Please who is this Mrs Jenna
This sounds so good andI would like to
be a party to this, is there any wayl can
speak with her?
Sure, what's Apk her directly but TH-cam's got a thing with posting numbers👎
Erin, your videos are so informative and enjoyable. Please keep them coming.
Back when I was in my early 60's I did max out my Roth IRA and my 401K with catch up contributions. I still haven't touched any of it but will soon with my 401K. Great video again as usual Erin!
Great video as always. One note I would like to throw out there. If you are contributing to a 401k, you should bear in mind the maximum percentage can be a problem if you make enough to reach the limit before year end. Your employer will make sure you don't go over and stop your contributions. However, if this happens, the rest of the year you'll miss out on employer match. So it's best to do the math and contribute the right percentage so you max out only at year end.
@@Larry-d1c um I don’t know about your 401k plan but with mine, once you hit the max, you still can contribute it just goes in post tax instead of tax deferred.
A great point! Absolutely essential! I took the max amount allowed and divided it by the number of pay periods in the year and that was what I had withheld every payday.
I thought this was the case as well, and have always lowered contributions so I don't quite max out. We'll, I got too much ot last year and learned that my company still deposits 4% even after I maxed it out.
It depends if your employer has a true up provision. Good to check but mine does a true up at the end of the year so that I get the full match.
My wife and I were both able to max out our 401k's for probably the last 12-15 years of working. We both retired at 59 (4 years ago). It works.
I always enjoy the straight forward way you explain finance in a way that is clear to non-finance people. My situation is very fortunate as I am eligible to be in a 401K and a 457B that status of being government and non-government at the same time has been game changing in growing my retirement accounts. Whatever your age always remember to pay the future you the most you comfortably can.
Thanks, Erin. I passed this on to my 60-year-old sister, who is a nurse in her final sprint to save.
Thanks so much Phil! 😊
Thank you for also mentioning the federal TSP! BTW... You do a great job with the graphics, making complex financial topics easy to understand. Keep posting your bloopers. I really enjoy them 🤣
Erin you should really have your own show on CNBC or Fox business. So clear, concise and educational.
For me, the maximum "catch-up" always seemed worth it. At that age I was earning more and my children were costing me less as they completed college and left home (my payroll). Therefore, I had more money available to contribute. The "catch-up" savings is the last money I will take out of retirement. It will be in the market for 20 to 40 years assuming I live to 90+. Thanks for another great video. I continue to send friends a link to your channel hoping you can gain more subscribers.
Catch up eligibility should be any roth or traditional amount that has not been maxed out in any previous year. Let everyone at any year go and back fund all that missed opportunity.
That's a spreadsheet I have for me and my wife. I pulled up the Roth IRA contribution limits per year and beside that I put the annual total returns of the s&p 500. Then I have two columns one for the total Roth IRA contribution I should have made since the 90s and the other column that compounds the running total returns on the annual returns/losses of the S&P index. I've contributed about half of what I could have since the 90s and I do regret taking out for a first time home. Looking at the total calculated balance plus returns of $400k of my balance alone makes me nauseous.
We can't afford to max out both of our workplace retirement accounts but our goal is to at least catch up to at least the contributions we missed since the 1990s plus current contributions and any extra we can put in. We won't have the $400k from mine plus my wife's ($380k ? Can't remember) at retirement because we missed out on all of those years of compounding, but at least we'll have more than we started with.
Thanks for the presentation! Helpful. I especially liked the tidbit about how much you could end up ahead by front loading your IRA each year (investing in January versus December).
Erin you REALLY should do another video on self-employed 401k plans. The 2024 self-employed contribution limit is $69,000, or if eligible $76,500 with catchup. After retiring early at 56 with a nice employer 401k nest egg accumulated starting at age 35 I went to work as a consultant. My specialty field is very narrow, so not much competition. Over the next 20 years I worked hard, but enjoyed that work quite a bit, and contributed the max into my own LLC 401k almost every year. It helped that the company I retired from was my major client for the first 10 years.
Of course, the max was much lower at the beginning. I set myself up as the plan administrator and hired an advisor to manage the funds, all fully invested in a stock portfolio. At retirement I rolled the 401k over to an IRA to put an end to IRS self-employed 401k reporting requirements. Now my RMD from that one fund is over half my retirement income.
This is a great way to go if you have the opportunity.
Really smart tip about investing in the 401k at the beginning of the year
I enjoy watching your outtakes at the end of video.
Thanks for doing such a clear explanation of these contribution changes! So many distractions to making a video😂
I've maxing out my TSP since age 50 (12 years). It has reduced my taxes significantly. In addition, when I run my retirement numbers, i will still be in a lower tax bracket for the rest of my life. Roth when you are younger, and Traditional when you age and loose deductions. You are right on target with your advice!!
Hi Erin. Good video and discussion today and should be beneficial to those who can see it's benefit and have the ability to take advantage of it. The bloopers/out takes were good as usual ... I noticed those pesky birds were getting to you again 😉 Have a good week and I'll see you on the next one. Larry, Central Valley, Ca.
The life expectancy of a 60 year old non smoking white male in the USA is 81. So on average those catch up contributions still have 20 years of growth/life in them. While it would obviously be better to get that invested sooner, with 2 decades of life in front of you I do not see that as meaningless.
If you have a spouse and you are not planning on dying at the same time you can push these contributions to Roth accounts and lessen the impact of the inevitable tax bomb. My and my wife's families have very different histories when it comes to longevity so this is something i think about.
If you are using Roth accounts as an estate planning tool that is another chunk of money that will have less headaches for your heirs.
Given that a minority of people can regularly max out all these contributions, this feels like a lot of window dressing anyway.
I have been retired for 12 years now. The increase of the CPI has been about 35% while the increase of the 401k limit with the catch-up amount is about 100%.
Thank you, Mrs. Erin. I decided to start fully funding my IRA at the beginning of the year to take advantage of the year’s earnings as you advised.
Hello Erin,
I’m an RN and I really really enjoy your videos. They are so helpful and very informative.
I NEVER skip any advertisements. This the only way we can pay back your sacrifices.
Btw, I have to be honest with you. There are times that It’s really difficult for me to concentrate to your videos like this. Do you know why? It’s because you’re so pretty.
I am using the catch up increases to load up on Roth. My pretax has its own momentum now, so the focus is building up a roth component in my 401k.
You may want to consider In-Plan Roth Conversions. Pre-Tax funds become Roth funds. You have to pay income tax on the amount converted. Just be sure *NOT* to pay the tax out of the converted funds -- if you do you'll have to pay a 10% penalty because the funds were withdrawn from your 401(k) account (if you are under Age 59 1/2). Pay the tax with what financial advisers call "other resources," i.e., After-Tax money outside of the 401(k) account.
I'm really surprised they added just to 61-63.... it'd be such easier branding to just do something like
50+ gets an extra $5000 catchup
60+ gets an extra $10,000 super catchup that phases out at 65 or 70 or something.
It'd make more sense, and be less arbitrary.
That being said I'm absolutely shocked at how high the percentages of 14% for 401k and 22% for IRAs are.
I really wish they'd share how much of that is overlapped. Is that 14% who do both, and 8% who also do IRAs for example or some other number.
The overlap is likely fairly small since there's an income limit for being able to contribute to both (and still get tax advantages), and earners under the limit will have a harder time saving the funds to contribute the maximum to both.
Turning 61. Yes I will be taking advantage of the all catch up limits to max out Roth 401k, Roth IRA, and HSA.💵💵💵💰💰💰
Throughout my entire working career I "paid myself first" and maxed out my 401k and IRA. I put the year's IRA money into the account in January. One year I wrote the check too soon and it was returned to me, telling me I had to wait until January 1st! And I put ALL the money into the stock market until I retired.
Just watch it if you do your withdrawals at the start of the year!!!
My Wife’s Company does an Employee Match and we Greatly Appreciate it but, they want to be sure you put 5% away every month so, if you don’t put it away (because you have already maxed out for the year) you don’t get their match!!!
Some 401(k) plans have a "true-up" provision. If your wife's plan has it, if she put away 10% during the first 6 months of the year, she would get the match on 5% as she went along for the 6 month, and the additional 5% at the end of the year. (Or perhaps even as you go along.) The easiest way to find out is to call the 401(k) Plan Administrator and ask the nice representative whether the plan has a true-up provision.
P.S. If the 401(k) plan does not have a true-up provision, then you are absolutely correct -- your wife must do a minimum of 5% every paycheck to get the full benefit of the match.
I should probably point out that 10% is likely *NOT* enough to enable you to retire comfortably. It's sort of a trap that people contribute only what gets matched. If your wife is maxing out her contribution and getting 100% of the employer match, that's great. What people need to do is to learn how to do Time Value of Money (TVM) calculations, calculate the amount they need to have saved by the desired date, and contribute enough to reach that goal.
@@brucestiles6477 Agreed. All the plans I’ve seen had true-up provisions. I haven’t seen one that would true-up as the year goes on (that makes too much sense), but instead around July of the following year after the annual 401(k) IRS filings are submitted. In my experience, companies will do true-up even after you’re no longer employed since you had already “earned” the matching.
I don't know how common that is, but your wife should petition her company to add a true-up provision to their plan. My employer added it in 2019.
Erin any plans to write a book and publish it in paperback/hardcover format?
😏
I would buy it!
The outtakes are hilarious. And blue is a great color for you.
It'll be a great year! Between my wife and I we can get $69,500 in tax advantaged dollars and that makes me smile 😀 If we add the match we'll get, that'll be well over $80k next year! We love the backdoor Roth, now if only my employer would allow the Mega backdoor!! Haha. Great recommendation on fully funding your IRA in Jan, we do it each year!
There's about a 0% chance I'll be working when in 60 🤣
That is what I am trying to max out my ROTH IRA within the first 6 months each year. Maybe I will max it out within 3 months in 2025.
If you max that out, consider some post-tax index funds in a brokerage. In case you retire early.
This late career increase is more of a marketing gesture than a change that will have anything close to having a significant impact on retirement income. The only significant impact it will have is on keeping people in the work force where they will still be paying into SS and Medicare. It would be far better to increase tax deferred savings limits in all age groups.
Great graphics, as always! With such a variety of retirement accounts, each with its own set of respective applicable limits, how do the contribution limits apply to someone with, for example, both an IRA and a 401(K)?
Well it does help those who start their employment in the 40s to maximize investing. As much as many may complain someone will benefit from this change. I for one will not bite for an additional 16k for the freedom of using MRA+ 10 in my fifties. Thanks again.
the gov should have just made it for age 50 and up this increase in catch up. how many people are saving now and at age 61 -63 - you might not even be working - a lot of ageism in the workplace- just another tax grab by the gov
Catchup contributions also do not count toward 415c limit. 415c limit for 2025 increased to $70k. So, you could contribute upwards of $81,250 minus employer match, if you are 60-63yo if your employer allows employee contributions toward 415c. The IRA section made it looked like you could do $7k tIRA and $7k rIRA rather than $7k being the combined IRA limit.
The key point being made here is that everyone should be working towards maxing out their 401k contributions. It is a big tax advantage for you, and you will notice big jumps in your overall balance once you reach that point. Don’t just do the employer match. Keep increasing your contributions every year no matter what. Your future self will thank you.
Great advice.
I've been trying to max out my Roth IRA, but my 401k is not maxed out. I'm kind of close to it, but it's tough to invest that much money. I'm hoping in the future I'll be able to afford it. I think increasing the contribution limit is great. Any help or increase is good I would think. If people can afford to do it that's a great benefit. I also agree with people in the comments that trying to help people in their prime working years would be a nicer benefit cause they'll have time for compounding to help.
Retirement accounts lagging taxable accounts heading into the final planned working year of 2025. Quite happy to get at least one year of the increased limit in 2025. Every little bit helps.
I can see this being useful if an employee can contribute to the Roth version of one of these employer-sponsored retirement plans, since there are no RMDs on Roth accounts. If their only option is a Traditional plan, I wouldn't bother and would instead put the money into something else (e.g. brokerage account) because of the risk of higher RMDs in the future. However, this extra money put into Traditional accounts might make sense if it was incorporated into a clever Roth conversion plan.
Maxing out all retirement accounts is a great way to take advantage of compound interest earlier on.
The Secure Act works perfectly for me. I make a great deal of royalty income (untaxed) during the year so the more of my job's salary I can tax defer the better. I plan to max out next year (age 62) and the year after (age 63) with an eye on retiring at 66 and a half.
I’m sick of throwing all my savings into my employer’s stupid Fidelity 401k plan with limited options. I can only hedge with cash
Erin, according to the IRS website, contributions to a 457 does not count toward the max contribution to a 403b account.
People need to be careful if they are accelerating their contributing to the 401k early in the year. If you do too much too early then you might miss out on full employer matching.
For example - say your employer fully matches the first 5% of your contribution and has a maximum limit of $5000 per year.
If you are earning $120K per year (paid once monthly) and decide to contribute the full $23.5K in the first 3 months, you will only be able to collect $1,500 of the free money (i.e. Employer match) before you have hit the max for the year and your employer will stop matching.
In this scenario you should plan on splitting out your 401k contributions till October to collect all $5000 that your employer will match.
Conclusion: Early contribution is good but it should still be spaced out enough to collect the very last dollar that your employer matches.
Good point. Front-end load your 401k, then drop to whatever the employer's match is, if they offer it. It's free money!
Maxing out your IRA early in the year can have drawbacks. Such as losing your income source and not earning enough to support the maximum contribution amount, or switching jobs to employer that has a 401(k) and contributing to both when you may end up not being eligible to contribute to both.
I'm 2 years away from retirement but don't think I can contribute more to my 401k. I feel like I need a bigger cash bucket than I currently have so will be putting most everything into that effort.
$34,000 is massive. Unless you’re making well into six figures it’s gonna be tough to get there.
According to the last Vanguard study only 13% of plan participants max out just the base contribution amount, let alone any "catch up". Most people who are short on retirement at a late age have a behavioral problem when it comes to savings and increasing the catch up limit isn't going to address that.
Any increases in limits are welcomed. I appreciate the honest reason being the IRS wants to optimize revenue gains. I do not think they have a logical leg to stand on in terms of not pushing limits higher because of inequality. I really don’t think the IRS or Congress cares. How about letting lower income earners decide how much they want to contribute if you truly value citizens. Maybe more citizens could become less reliant upon SSB - no never mind, of course they won’t haha.
What I would love to learn is the WHY Americans are not contributing nor maxing out on these accounts. Is it lack of education? Yup. Is it recurring expenses matter more to them? Yup. Is it not living below one’s means? Yup. Do I think Congress should therefore talk about getting rid of Roth etc as a result? Nope!
Sorry for being negative; it just seems that we - including Congress - are focused more on the current balance sheet than longer term planning.
I welcome future videos discussing these topics 😊
Thank you for bringing such an inviting spirit to these topics.
Cheers
Michael Amir
We able to max out my wife's 401k and with the growth of her investments it made a significant difference to her final retirement account compared to her work mates.
I would like it if they increased the IRA/ Roth IRA $amount bc there is more and better options and less costly than in the 401K plans out there
If you use the opportunity to max your contributions into the Roth IRA and 401k's at age 60 to 63 then you are likely to successfully see it grow as those accounts are usually drawn upon later in retirement.
Thanks!
At 60 that's only $16k extra you can put away before retirement at 65. Hardly seems worth the effort as there's no chance at compounding.
I am coming to the limit that I can put in my 401k because of other deductions. I'm semi retired now and I am putting in 55% of my paycheck into my 401k but only work 1 or 2 12 hour shift days a week. I have to leave money for my other benefits and income taxes. I am still working because my employer has me working part time but I get full time benefits and getting health insurance in your mid 50s is very expensive.
Awesome 🎉🎉🎉🎉
I got it...that bird was on camera...slow down....my stomach is so loud 😂😂😂😂😂
Those are pre tax contributions you mentioned, the true contribution limit (pre + post) is somewhere between 69k and 70k for those under 55
huh?
Would like to see who actually falls into this band with metrics, how much they have saved and their salary to max out. Won’t you just end up taking the money out when you retire at say 65? Would it be better to do Roth conversions with the money, assuming you have been saving. I would think you have other bills at this point as well and tough to save 35%, saying making 100k/family. Home costs, repairs, improvements, vehicles, kids college, etc. Hopefully these new limits are helping someone.
This is all great news, but how many people can set this much aside to invest?
What about combined 401k limit for those 60-63? Will the company and individual limit go up as well?
I would be interested in learning how employer matching *Roth* contributions "work." Are they included in an employee's W-2 income? Does the employer have to forego taking a tax deduction on Roth 401(k) matching contributions?
All employer matching amounts are required to be traditional, regardless of whether the employee’s contribution was traditional or Roth. Employer can deduct the match as a business expense. The match is not included on employee’s W-2. Employee will owe income tax when withdrawing funds derived from the employer match.
You provide great advice, and you’re beautiful….what’s not to like about this channel 🙌🏼🙌🏼😄!
What are the income limits to 401K and catch up contributions in 2025 and 2026? My understanding is that in 2026 the catchup for "high" earners will have to be Roth 401K. Yes?
I think if I were to max out my 401k when I am 60, I would not know to decrease the amount when I turn 64. How much do I loose to penalties in that case?
I read about the special catch-up change a few months ago. I'm 63 now so need I say more. 🙄
We are financial mutants and we search for more and more ways to save. We are saving between 40-45% and wish we had more tax incentivized ways to put more away.
-- And as always, I love my 'Erin's Errors' at the end of the videos. I never saw or heard a bird or a plane. LOL :P ~~~
I love the bloopers being named Erin's Errors - I might steal that 😂
Yeah I was really hoping they'd boost the Roth IRA limits
Weird coincidence, but that sorta helps me with plan/road I’m on. If only I’d listened to my gut years ago. True story, I’ve always been into computers. Building them and such as a hobby. So I knew about nvidia graphics cards way early on. I thought then, you should buy a few shares of that, they’re sorta the only game in town. I think they were trading around $45-$50 at the time. I thought that would be a good investment, but of course I didn’t 😂😂😂
Catch-up contributions always struck me as a lazy attempt to address the fact that most people are saving nowhere near enough to retire. Time in the market is most important and if you're relying on catch-up contributions, you're already too late. Extending more catch-up contributions into the 60's is an indictment on the poor financial health of Americans. Those who need more at that stage likely can't hit the standard 401k limit, let alone the 50+ catch-up, or the new catch-up.
Let's be real: this will be used by people who're already set for life funneling more in because they can. Most people simply do not have the means to save for retirement between rent, student loans, etc. Young people today will never own a home, let alone have the means to set aside money for retirement. Worse still, no way Social Security will exist by the time we're in our 60's.
Point of note: the greater than/less than symbols on the MAGI chart is not completely correct
The catchup contributions are nice but I am thinking for most people have yet to max out their accounts. Its people like me that will benefit and I have been funding my 403B for almost 27 years. Although it did take me a while to get to the max out amount. I also turn 60 next year. So the question is can I max out my account in the year I turn 60? Also I don't plan on retiring until at least age 70 but although I am shooting for 75.
@ErinTalksMoney Thanks for the eductation. Very very good. 🙃
I file jointly and make over the Roth limit. I’ve been contributing to the Roth for the past 2 years. Just found out about the limit. How do I move the money out of the Roth to another investment without a tax penalty?
were you over the income limit or within the phase out the past 2 years? If you are over the income limit, you have until tax filing deadline to fix the error. You have to either withdraw the ecess contribution along with returns (earnings in this case are considered income since they aren't eligible to be sheltered in the Roth); you can reacharacterize the excess to plus gains into a tIRA; or you can apply forward the excess contributions to future rIRA contributions. This invokes a 6% annual penalty, though, until you have corrected all excess contributions and earnings. If you past the tax filing deadline (e.g. since you've been contributing past 2 years), you owe 6% penalty on excess contributions every year until you correct the excess problem. You'll need to file Form 5329 Additional Taxes on Qualified Plans (Iincluding IRAs).
I’m not motivated to put more in the 401k at this point. Why not saving after tax money and put straight into a Roth instead?
Or build a savings account?
I’m 64 and planning to retire real soon!
...but you got to let it grow to have it be useful. You need the time. Using 60-63 will probably not give it enough time to grow UNLESS you have other accounts to tide you over.
I don't care about these changes at all, already retired and trying to reduce the size of my 401k...just watched for the bloopers.
This is certainly not something you can dwell on but somehow it seems particularly relevant at the moment: how can one be comfortable making projections about “average market performance” with S&P at 6K? The risks and opportunities one sees for their nest egg is the biggest challenge in retirement savings. You can do well not understanding the risks but the continued upward trajectory of the stock market is not guaranteed and the continued “average performance” isn’t a good assumption in my opinion.
A market like the one we have had creates the impression that equities are ‘safe’ and the Fed lowering interest rates will encourage more investment in equities. If (when) it does crash, the pain will be felt as extraordinarily as the exuberance has been for this last 10 years of almost uninterrupted upward movement.
huh? People said the same thing about the S&P when it broke 2k, then 3k, then 4k, etc.
@@hanwagu9967 they have been saying that, you’re right. I don’t think that is an argument to be optimistic about what the market may do next though.
The market is still cyclical - we haven’t eliminated the potential for bear markets because it is the product of human nature
What happens if you go over the limit? I’m going to be about 150 shy of maxing it out because I don’t want to go over the limit…
If your 401(k) plan contributions are being done by payroll deduction, your employer should automatically stop your contributions when you've hit the max. The final contribution would be less than the usual amount because it hit the limit. Ask your payroll people.
If you have a "Solo" -- a plan for a business owner and spouse -- you are in control of the amount that you contribute, so that would be easy.
What's better? Actually using what you saved for in retirement!
A whopping $500… Don’t get me wrong, something is better than nothing. But it could have gone to say $25k. I know that’s tough in my age bracket 35-55, but it would have made a much bigger impact.
I am currently at about 45% of my income. I want to but will have to shift
😂love u❤
I take advantage of all the ketchup I can do.
Ha
I'm trying to understand why this is a big deal. If you have enough money to actually take advantage of the extra four thousand dollars in contributions. And you did that 4 years. How much extra impact is this really going to make for you?
The problem with the 401k is that you think this is your money, but in reality you have a silent partner - the government - who considers your 401k as "our" money. The people who are most capable of making the catch up contributions are going to be the higher income earners. By making these catch up contributions, these folks will be hit harder by the "RMD stick" once they turn 72. Heaven forbid if you work into your 70's continuing to sock away money in your 401k, the RMDs will be that much larger. If you're turning 60 in the next few years, you'd probably be better off paying the taxes and investing in a post-tax account. Then use this to fuel your annual Roth IRA contribution.
Or use the Roth 401k moving forward. I know that wasn’t available for boomers most of their career, but as a GenXer, I’m taking full advantage of the opportunity. You can still use this for catchup contributions.
@@chemquests The Roth 401k is a good option is your employer's plan offers it. Especially in your early working years. Just remember to roll that Roth 401k into a Roth IRA when you separate from your current employer. Current rules have RMD's on Roth 401k's but not on Roth IRAs. Although I keep reading that the RMDs for Roth 401k's will be going away. Just something to keep an eye on. I'm turning 60 next year and am trying to sort this out.
@ yes indeed. I’m 48 and been with the same employer the whole time. We’ve had the Roth option about 5 years, so I’m still heavy traditional. I’ll definitely be rolling it over and doing a bunch of conversions when the time comes.
One way the government could fix this is to remove earned income tax once a person reaches "retirement" age.
Increasing contribution limits in increments of $500 is not a preference -- it's black letter law.
Put all that in a ROTH 401k and you are set.
All I heard was the limits are so low because government is huge and needs the tax revenue 😂 Sounds like if we cut government our contribution limits should go up.
What did the mother tomato say to the baby tomato after the mother tomato stomped her foot down on the baby tomato? "KETCHUP" Your message reminded me of this joke.
Investing in stocks is planting a tree for your future; with patience, it will bear fruit."
Absolutely Just like a tree, investments need time and care to reach their full potential.
Working with a financial adviser helped me develop a tailored investment strategy, leading to significant growth in my portfolio.
I'd love to be introduced to a trustworthy adviser who can help me develop a personalized investment strategy.
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Thank you for this amazing tip. I just looked the name up and wrote her.
Nice but seriously, at 60-63, that’s only 4 years of an extra $4k above the normal catch up, so an extra $16k total. Unless you aren’t retiring until like 70 that’s almost no time for that money to really grow to benefit you particularly well… kind of silly. I think that it’s a stop gap by the gov because they see how little so many people have saved… but hey I’ll take any opportunity to shovel more money away into retirement (although I’m planning to be done at 62, so limited opportunities for me with this extra… 10 years to go, I can’t wait! I’m soooooo sick of working and dealing with all the nonsense… I’ve been maxing out my 401k contributions every year (plus the catch up now) for at least the last 10+ years and was putting in a pretty good amount before then. So I’m in good shape, particularly since I’m single with no kids. I’m projected to take home more in retirement than I do right now while working!
Dependent on your current gross income the extra contributions to 401k could lower your income tax to be immediately beneficial.
@ yup. It definitely helps me already… me before tax income is roughly $150k but with maxing out 401k plus the catch up, plus other things like healthcare flex spending, it drops my taxable income below 100k..
Also that 16k could grow for 20-30 years based on your longevity. Assuming those dollars are your last and last out.
she looks great in blue
What are you going to do with all that money invested when you are 65, sick and tired and can't enjoy all that saved money anymore? So you invested all those years and restrained yourself from enjoying a good life just to die a few years after retirement and leave your whole investment to others that might not deserve it 😢
I'm 78, an active private pilot, still taking several international vacations every year, and generally enjoying life. I can do all that because I played a long game with my savings. Try a more positive outlook. It may help you live longer if you have a plan for what happens after 65.
Whoopi....Not much time to Benefit from this. Still saving though
I'm 63 tomorrow, Nov 12. Can I put in the extra in my 401k?
Starting next year looks like. Sorry, looks like no. Nevermind.
I don't think so. This doesn't start until 2025. Unfortunately, you will turn 64 in 2025 and won't qualify. You lost out on this one due to timing.