Latest news with #DanGalli
Business Mayor
02-05-2025
- Business
- Business Mayor
There's a new 'super funding' limit for some 401(k) savers in 2025. Here's who qualifies
Richvintage | E+ | Getty Images If you're an older investor and eager to save more for retirement, there's a big 401(k) change for 2025 that could help boost your portfolio, experts say. Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January. But starting this year, some older workers can leverage a 401(k) 'super funding' opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC. Here's a look at other stories impacting the financial advisor business. Here's what investors need to know about this new 401(k) feature for 2025. Higher 'catch-up contributions' For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you're age 50 and older, known as 'catch-up contributions.' Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors. Here's the 2025 catch-up limit by age: 50-59: $7,500 60-63: $11,250 64-plus: $7,500 However, 3% of retirement plans haven't added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC. Of course, many workers can't afford to max out 401(k) employee deferrals or make catch-up contributions, experts say. For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard's How America Saves report. 'A great tool in the toolbox' The higher 401(k) catch-up is 'a great tool in the toolbox,' especially for higher earners looking for a tax deduction, said Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts. While pretax 401(k) contributions offer an up-front tax break, you'll owe regular income taxes on withdrawals, depending on your future tax bracket. However, your eligibility for higher 401(k) catch-up contributions hinges what age you'll be on Dec. 31, Galli explained. For example, if you're age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can't make the contribution if you're 63 now and will be 64 by year-end. On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report. READ SOURCE
CNBC
02-05-2025
- Business
- CNBC
IRS unveils new HSA limits for 2026. Here's what investors need to know
The IRS on Thursday unveiled 2026 contribution limits for health savings accounts, or HSAs, which offer triple-tax benefits for medical expenses. Starting in 2026, the new HSA contribution limit will be $4,400 for self-only health coverage, the IRS announced Thursday. That's up from $4,300 in 2025, based on inflation adjustments. Meanwhile, the new limit for savers with family coverage will jump to $8,750, up from $8,550 in 2025, according to the update. More from Personal Finance:There's a new 'super funding' limit for some 401(k) savers in 2025This 401(k) feature can kick-start tax-free retirement savingsGold ETF investors may be surprised by their tax bill on profits To make HSA contributions in 2026, you must have an eligible high-deductible health insurance plan. For 2026, the IRS defines a high deductible as at least $1,700 for self-only coverage or $3,400 for family plans. Plus, the plan's cap on yearly out-of-pocket expenses — deductibles, co-payments and other amounts — can't exceed $8,500 for individual plans or $17,000 for family coverage. Investors have until the tax deadline to make HSA contributions for the previous year. That means the last chance for 2026 deposits is April 2027. If you're eligible to make HSA contributions, financial advisors recommend investing the balance for the long-term rather than spending the funds on current-year medical expenses, cash flow permitting. The reason: "Your health savings account has three tax benefits," said certified financial planner Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts. There's typically an upfront deduction for contributions, your balance grows tax-free and you can withdraw the money any time tax-free for qualified medical expenses. Unlike flexible spending accounts, or FSAs, investors can roll HSA balances over from year to year. The account is also portable between jobs, meaning you can keep the money when leaving an employer. That makes your HSA "very powerful" for future retirement savings, Galli said. Healthcare expenses in retirement can be significant. A single 65-year-old retiring in 2024 could expect to spend an average of $165,000 on medical expenses through their golden years, according to Fidelity data. This doesn't include the cost of long-term care. In 2024, two-thirds of companies offered investment options for HSA contributions, according to a survey released in November by the Plan Sponsor Council of America, which polled more than 500 employers in the summer of 2024. But only 18% of participants were investing their HSA balance, down slightly from the previous year, the survey found. "Ultimately, most participants still are using that HSA for current health-care expenses," Hattie Greenan, director of research and communications for the Plan Sponsor Council of America, previously told CNBC.
CNBC
02-05-2025
- Business
- CNBC
There's a new 'super funding' limit for some 401(k) savers in 2025. Here's who qualifies
If you're an older investor and eager to save more for retirement, there's a big 401(k) change for 2025 that could help boost your portfolio, experts say. Americans expect they will need $1.26 million to retire comfortably, and more than half expect to outlive their savings, according to a Northwestern Mutual survey, which polled more than 4,600 adults in January. But starting this year, some older workers can leverage a 401(k) "super funding" opportunity to help them catch up, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC. Here's a look at other stories impacting the financial advisor business. Here's what investors need to know about this new 401(k) feature for 2025. For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 if you're age 50 and older, known as "catch-up contributions." Thanks to Secure 2.0, the 401(k) catch-up limit has jumped to $11,250 for workers age 60 to 63 in 2025. That brings the max deferral limit to $34,750 for these investors. However, 3% of retirement plans haven't added the feature for 2025, according to Fidelity data. For those plans, catch-up contributions will automatically stop once deferrals reach $7,500, the company told CNBC. Of course, many workers can't afford to max out 401(k) employee deferrals or make catch-up contributions, experts say. For plans offering catch-up contributions, only 15% of employees participated in 2023, according to the latest data from Vanguard's How America Saves report. The higher 401(k) catch-up is "a great tool in the toolbox," especially for higher earners looking for a tax deduction, said Dan Galli, a CFP and owner of Daniel J. Galli & Associates in Norwell, Massachusetts. While pretax 401(k) contributions offer an up-front tax break, you'll owe regular income taxes on withdrawals, depending on your future tax bracket. However, your eligibility for higher 401(k) catch-up contributions hinges what age you'll be on Dec. 31, Galli explained. For example, if you're age 59 early in 2025 and turn 60 in December, you can make the catch-up, he said. Conversely, you can't make the contribution if you're 63 now and will be 64 by year-end. On top of 401(k) catch-up contributions, big savers could also consider after-tax deferrals, which is another lesser-known feature. But only 22% of employer plans offered the feature in 2023, according to the Vanguard report.
Business Mayor
01-05-2025
- Business
- Business Mayor
This lesser-known 401(k) feature can kick-start your tax-free retirement savings
Don Mason | The Image Bank | Getty Images If you're eager to increase your retirement savings, a lesser-known 401(k) feature could significantly boost your nest egg, financial advisors say. For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 in 'catch-up contributions' if you're age 50 and older. That catch-up contribution jumps to $11,250 for investors age 60 to 63. Some plans offer after-tax 401(k) contributions on top of those caps. For 2025, the max 401(k) limit is $70,000, which includes employee deferrals, after-tax contributions, company matches, profit-sharing and other deposits. If you can afford to do this, 'it's an amazing outcome,' said certified financial planner Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts. Here's a look at other stories impacting the financial advisor business. 'Sometimes, people don't believe it's real,' he said, because you can automatically contribute and then convert the funds to 'turn it into tax-free income.' However, many plans still don't offer the feature. In 2023, only 22% of employer plans offered after-tax 401(k) contributions, according to the latest data from Vanguard's How America Saves report. It's most common in larger plans. Even when it's available, employee participation remains low. Only 9% of investors with access leveraged the feature in 2023, the same Vanguard report found. That's down slightly from 10% in 2022. How to start tax-free growth After-tax and Roth contributions both begin with after-tax 401(k) deposits. But there's a key difference: the taxes on future growth. Roth money grows tax-free, which means future withdrawals aren't subject to taxes. To compare, after-tax deposits grow tax-deferred, meaning your returns incur regular income taxes when withdrawn. That's why it's important to convert after-tax funds to Roth periodically, experts say. 'The longer you leave those after-tax dollars in there, the more tax liability there will be,' Galli said. But the conversion process is 'unique to each plan.' Often, you'll need to request the transfer, which could be limited to monthly or quarterly transactions, whereas the best plans convert to Roth automatically, he said. Focus on regular 401(k) deferrals first Before making after-tax 401(k) contributions, you should focus on maxing out regular pre-tax or Roth 401(k) deferrals to capture your employer match, said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina. After that, cash flow permitting, you could 'start filling up the after-tax bucket,' depending on your goals, he said. 'In my opinion, every dollar needs to find a home.' In 2023, only 14% of employees maxed out their 401(k) plan, according to the Vanguard report. For plans offering catch-up contributions, only 15% of employees participated.
CNBC
01-05-2025
- Business
- CNBC
This lesser-known 401(k) feature can kickstart your tax-free retirement savings
If you're eager to increase your retirement savings, a lesser-known 401(k) feature could significantly boost your nest egg, financial advisors say. For 2025, you can defer up to $23,500 into your 401(k), plus an extra $7,500 in "catch-up contributions" if you're age 50 and older. That catch-up contribution jumps to $11,250 for investors age 60 to 63. Some plans offer after-tax 401(k) contributions on top of those caps. For 2025, the max 401(k) limit is $70,000, which includes employee deferrals, after-tax contributions, company matches, profit sharing and other deposits. If you can afford to do this, "it's an amazing outcome," said certified financial planner Dan Galli, owner of Daniel J. Galli & Associates in Norwell, Massachusetts. Here's a look at other stories impacting the financial advisor business. "Sometimes, people don't believe it's real," he said, because you can automatically contribute and then convert the funds to "turn it into tax-free income." However, many plans still don't offer the feature. In 2023, only 22% of employer plans offered after-tax 401(k) contributions, according to the latest data from Vanguard's How America Saves report. It's most common in larger plans. Even when it's available, employee participation remains low. Only 9% of investors with access leveraged the feature in 2023, the same Vanguard report found. That's down slightly from 10% in 2022. After-tax and Roth contributions both begin with after-tax 401(k) deposits. But there's a key difference: The taxes on future growth. Roth money grows tax-free, which means future withdrawals aren't subject to taxes. To compare, after-tax deposits grow tax-deferred, meaning your returns incur regular income taxes when withdrawn. That's why it's important to convert after-tax funds to Roth periodically, experts say. "The longer you leave those after-tax dollars in there, the more tax liability there will be," Galli said. But the conversion process is "unique to each plan." Often, you'll need to request the transfer, which could be limited to monthly or quarterly transactions, whereas the best plans convert to Roth automatically, he said. Before making after-tax 401(k) contributions, you should focus on maxing out regular pre-tax or Roth 401(k) deferrals to capture your employer match, said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina. After that, cash flow permitting, you could "start filling up the after-tax bucket," depending on your goals, he said. "In my opinion, every dollar needs to find a home." In 2023, only 14% of employees maxed out their 401(k) plan, according to the Vanguard report. For plans offering catch-up contributions, only 15% of employees participated.
