Suze Orman On How Pre-Retirees Can Max Out Their 401(k) Savings Due To New Contribution Rules

Có thể bạn quan tâm

‘It’s A Lot, But Worth It’: Suze Orman On How Pre-Retirees Can Max Out Their 401(k) Savings Due To New Contribution Rules

Personal finance expert Suze Orman urges pre-retirees to take advantage of significant new opportunities to boost their 401(k) savings. Updated contribution rules will take effect in 2025, allowing workers aged 60 to 63 to save more than ever.

Bạn đang xem: Suze Orman On How Pre-Retirees Can Max Out Their 401(k) Savings Due To New Contribution Rules

The IRS announced that starting in 2025, workers aged 50 and older can make a standard catch-up contribution of $7,500 in addition to the regular 401(k) contribution limit of $23,500. This brings the total annual contribution limit to $31,000 for those 50 and older.

Don’t Miss:

However, the big news applies to workers aged 60 to 63. Instead of the standard $7,500 catch-up limit, this group will be eligible to contribute up to $11,250 in catch-up contributions. Combined with the regular limit, their annual total rises to $34,750.

“This can give a serious boost to your retirement security,” Orman writes in her December blog, emphasizing that the enhanced limits provide a rare opportunity to supercharge savings as retirement approaches.

In her blog, Orman explains that maximizing your contributions can yield great long-term benefits. For example, she illustrates that contributing $31,000 for three consecutive years could grow to $102,000, assuming a 5% annual growth rate. Over the next 10 years, however, that number could grow to $165,000; in 20 years, it could exceed $270,000.

Xem thêm : 44-Year-Old With $700K In Savings Grapples With Market Uncertainty – ‘Should I Bet On Real Estate, Business Or Vanguard Funds?’

See Also: ‘Scrolling To UBI’ — Deloitte’s #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.26/share with a $1000 minimum.

For those aged 60 to 63, the potential for even higher contributions offers greater growth opportunities.

“I know it’s a lot,” Orman acknowledges, “but rethinking your spending might help you find the money to save more in your 401(k).”

The new rules also offer greater flexibility in how contributions are made. Starting in 2025, workers can allocate their catch-up contributions to either traditional 401(k)s or Roth 401(k)s.

Orman strongly advocates for Roth accounts, which are funded with after-tax dollars. While traditional 401(k) contributions reduce taxable income now, they are taxed upon withdrawal in retirement. Roth accounts, on the other hand, allow retirees to withdraw funds tax-free.

“The chance to build up tax-free savings now is especially important if you have already done decades of savings in a traditional retirement account,” Orman advises. She also points out that starting in 2026, high-income earners must make catch-up contributions to Roth accounts.