Recently, in the news, there have been talks in both the House and Senate to amend The Catch-Up Contribution from the Economic Growth and Tax Relief Reconciliation Act of 2001.
For those who might not know, there are annual contribution limits toward retirement accounts (401k - $19,500, IRA/Roth IRA - $6,000, SIMPLE IRA - $13,500, etc.). The Catch-Up Contribution allows those 50 years of age or older to contribute an additional amount of money to, “Catch-Up” for their nearing retirement. Since only 15% of workers 50 and older use catch-up contributions, according to Vanguard’s 2021 How America Saves report; the House & Senate have two different options to change that.
In the House, they are proposing to increase the 401(k) catch up contribution from $6,000 to $10,000 but only for those aged 62, 63 or 64. Furthermore, they want to limit the contribution to be in after-tax dollars (Roth). The Senates proposal wants to increase the 401(k) contribution from $6,000 to $10,000 but differs in that they want to make it accessible to those aged 60 & older and keep the pretax treatment. Both ways could help those who might need to save more later in life.
If you have any questions about Catch-Up Contributions or want to know how to start making them, feel free to reach out, we are always happy to help!