Starting in 2025, people in their early 60s can contribute an extra $11,250 to their 401(k)s through the new “super catch-up” provision. However, only those aged 60 to 63 for the full year qualify, and higher earners making over $145,000 must put these contributions into Roth accounts instead of pre-tax ones.
Matt Cleary highlights the urgency for high earners to take advantage of pre-tax 401(k) contributions while they still can. Since catch-up contributions for those earning over $145,000 will be Roth-only starting in 2025, he suggests maximizing pre-tax deferrals now to benefit from tax savings.
He emphasizes that the decision between pre-tax and Roth contributions depends on factors like future tax rates and retirement goals. Having a mix of both can provide flexibility and prevent all savings from being taxed the same way in retirement.
"The limited window of time creates more urgency for high-income pre-retirees to take advantage of tax deferrals in the pretax 401(k) while they still can."
Interested in learning more? Read the full Financial Advisor article here.
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