By Daily Mail (U.S.) | Created at 2024-11-02 04:03:20 | Updated at 2024-11-02 06:32:33
2 hours ago
Older workers can now put more savings than ever into their 401(K) accounts, under new rules starting in 2025.
Every year, the Internal Revenue Service (IRS) announces the maximum amount savers can put in their workplace retirement account, which is adjusted for inflation.
Americans over the age of 50 are also able to put extra cash into their retirement savings with catch-up contributions.
From next year, workers specifically between the ages of 60 and 63 will have a higher catch-up contribution limit, the IRS announced Friday.
The change is designed to help boost the savings pots of people in their early 60s, who may not have put enough money away earlier in their lives or may have dipped in and out of the workforce to have a family.
Older workers can now put more savings than ever into their 401(K) accounts, under new rules starting in 2025
Starting in 2025, workers between the ages of 60 and 63 can make a catch-up contribution of up to $11,5000 into their 401(K).
This means that people who turn those ages sometime during next year will be able to put up to $34,750 into their workplace retirement plans.
That is about 14 percent more than in 2024, and marks the biggest change to 401(K) contribution rules in two decades, The Wall Street Journal reported.
The change comes amid a series of inflation adjustments made by the IRS, which the tax authority does every year.
It also announced the maximum amounts people of every age can save into their retirement accounts in 2025.
Americans aged under 50 can contribute up to $23,500 to their 401(K) plans next year - which is up $500 from 2024.
Those aged between 50 and 59 can contribute $31,000 overall, those aged between 60 and 63 can add $34,750 and over-64s can add $31,000.
Workers who participate in 403(b) and the federal government's Thrift Savings Plan will also be able to increase their annual contribution to $23,500 in 2025, up from $23,000 in 2024.
Some annual contributions remain the same, however.
The limit on annual contributions to an IRA will remain at $7,000 and the IRA catch-up contribution limit for people 50 and over will stay at $1,000 for 2025.
Starting in 2025, workers between the ages of 60 and 63 can make a catch-up contribution of up to $11,5000 into their 401(K)
The IRS also announced the maximum amounts people of every age can save into their retirement accounts in 2025
It comes after the IRS announced an increase increase standard deductions for 2025, which is the portion of annual income exempt from taxation.
For single taxpayers and married individuals filing separately in 2025, the standard deduction is rising to $15,000 - up $400 from 2024.
For couples who file jointly, it will be $30,000 for 2025, an $800 jump from the year prior.
Heads of households, meanwhile, will get a $22,500 standard deduction, which is up $600 from 2024.
The IRS makes these adjustments every year to account for inflation, which has been on a downward trajectory in recent months.
The annual rate of inflation was up 2.4 percent from a year earlier in September, which was a marked decrease from highs of 9.1 percent in June 2022.
This means that while taxpayers will again see higher standard deductions for 2025, the increases announced last month are less than those seen in recent years.
