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Secure Act 2.0 – Additional Changes to Catch-up Contributions

| February 24, 2023

In a previous blog post, the change in the taxation of catch-up contributions to employer sponsored retirement accounts for high income employees (those who earned $145,000 or more in the previous year) was covered. So, while on the topic of catch-up contributions to retirement accounts, there are more changes to cover.

Retirement plan participants aged 50 and over are allowed to make catch-up contributions to their employer’s retirement plan or to an IRA. These contributions are extra contributions in addition to the normal IRS limits designed to allow employees who are nearing retirement age to contribute more to their retirement savings account to “catch-up” or get their retirement savings on track to meet their retirement goals.

The Secure Act 2.0 makes two important changes that will benefit some employees seeking to contribute more to their retirement plans. First, the catch-up amount for IRAs will be indexed for inflation after 2024 and will increase in $100 increments.

Second, the amount of catch-up contributions an employee can make to their employer-sponsored retirement plan will increase for employees age 60-63. Starting in 2025, the amount of the new catch-up will be the greater of $10,000 or 150% of the normal catch-up amount allowed to those over age 50. So, going forward there will be multiple catch-up contributions tiers, one impacting those age 50 to 59, another impacting those age 60 to 63, and then yet another amount for those over 63.