Latest news with #HowAmericaSaves
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
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.
Yahoo
20-02-2025
- Business
- Yahoo
Are Americans retiring later because they ‘love to' or ‘need to'? George Kamel clears it up for Maria Bartoromo
According to recent data from the Bureau of Labor Statistics, there are around 38,980,000 Americans aged 55 and over in the workforce right now. Among this demographic, around 38% of people are participating in the labor force. That's a staggering number, given that many people aim to retire in their 60s, if not sooner. I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) A near-record number of Americans are grappling with $1,000 car payments and many drivers can't keep up. Here are 3 ways to stay ahead Protect your retirement savings with these 5 essential money moves — most of which you can complete in just minutes Maria Bartoromo of Fox Business recently invited finance expert and co-host of The Ramsey Show George Kamel to discuss this issue. Bartoromo asked Kamel if so many Americans are working into their traditional retirement years because they want to or because they need to. Kamel was clear in his answer: 'They need to work,' he said. "Retirement is not an age, it's a financial number." If you're in your 60s or even your 70s and you don't have a big enough retirement fund to support yourself, leaving work isn't going to be an option. 'Here's the mindblowing financial advice: if you invest nothing, you'll have nothing,' said Kamel. So, just how many seniors are working out of financial necessity — and what can you do to avoid becoming one of them? According to the Transamerica Center for Retirement Research, 56% of baby boomers are either already working past age 70, think they will work past age 70 or don't think they will ever retire. In 82% of cases, those boomers said that working late in life is necessary for financial reasons. A look at the account balances of older Americans shows why so many may be forced to keep working for such a long time. Vanguard's How America Saves report revealed that the median defined benefit contribution account balance is just $87,571 among those 55 to 64 while individuals who are 65 and over have a median balance of only $88,488. For a 65-year-old senior with the median balance who wants to maintain a safe 4% withdrawal rate, their investments would only give them $3,539.52 in annual income from savings. Sadly, Social Security isn't going to fill in much of the gap, either. The average Social Security benefit in 2025 is only $1,976 per month, so the income from savings and Social Security for someone who received the typical benefits from both would only be $27,252. That's roughly $10,000 away from the federal poverty line. With such a low income, it's no wonder so many older Americans feel like they have to work to bring in more money. Read more: Home prices in America could fly through the roof in 2025 — here's the big reason why and how to take full advantage (with as little as $10) If you don't want to have to work past your full retirement age, your best option is to start investing as early as possible and to invest as much as possible. As Kamel suggested, you should start investing as much as you can even if it isn't a lot so you can start to get compound growth working for you. Compound growth helps your wealth grow since your returns can be reinvested. If you start early enough, you can turn a small amount of money into a nest egg that's easily big enough to retire on. In fact, if you invest $300 a month for 35 years and earn 10% average annual returns, you'll have close to $1 million by retirement age. If you're starting later, it's going to take more money to get to your goal — but the key is to just get going because investing in something is better than nothing. If you have the option, you can sign up to have just a little bit of money taken out of your paycheck and put into your 401(k) or transfer a little bit of money to an IRA on payday if you don't have a 401(k). Then, increase it over time. You can also save your raises before you get used to living on the extra money to increase the amount you're investing and put tax refunds or cash gifts into retirement accounts. Or you can even pick up a side gig and invest all the money you earn from it. The earlier you start taking these steps, the less likely it is you will need to work into retirement. Of course, if you're already in retirement or near it, it's going to be harder. You should still aim to save as much as you can, though, because every dollar you can put into the market is a dollar that can work for you and get you closer to a secure future. Jamie Dimon issues a warning about the US stock market — says prices are 'kind of inflated.' Crashproof your portfolio with these 3 rock-solid strategies This self-made $500M real estate mogul reveals his 'essential' US portfolio that he says Amazon 'can't hurt' — here's how everyday investors can copy his secret formula Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Sign in to access your portfolio
