Tag: tax deferred

A new rule means some 401(k) contributions will no longer be tax-deferred. Here’s who will be affected | CNN Business

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A new rule is going into effect next year that will affect high earners who make “catch-up contributions” in their 401(k)s or other tax-deferred workplace retirement plans.

The rule, which was created under the Secure 2.0 retirement law, will essentially eliminate the immediate tax break for catch-up contributions that you get for the bulk of your other contributions to a 401(k) — or 403(b), 457(b), Simplified Employee Pension Plan (SEP), or SIMPLE IRA.

Here’s a breakdown of what will change and who, specifically, will be affected.

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What the new 401(k) limits and other changes mean for your retirement | CNN Business

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Come next year, you will be allowed to save a little more in your 401(k) on a tax-deferred basis than you can this year, unless you’re in your early 60s, in which case for the first time you’ll be allowed to save a lot more.

The new contribution limit for 401(k)s and other workplace retirement plans in 2025 will be $23,500, up from $23,000 currently, the Internal Revenue Service said Friday.

The IRS did not, however, increase the limit on catch-up contributions — that’s the extra amount of money people 50 and older can contribute annually in tax-advantaged plans like 401(k)s, 403(b)s, 457 plans and the federal government’s Thrift Savings Plan. The catch-up contribution limit will remain the same at $7,500.

Source: What the new 401(k) limits and other changes mean for your retirement | CNN Business