MAIN POINTS

1. Higher Contribution Limits for IRAs and 401(k)s:

401(k) Contributions:

• In 2025, the employee contribution limit for 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan will increase to $23,500. Individuals aged 50 and older can contribute an additional $7,500 in standard catch-up contributions, for a total of $31,000.

Higher 401(k) Catch-Up Contributions for Ages 60–63:

• SECURE 2.0 introduces a special catch-up contribution for individuals aged 60, 61, 62, and 63, allowing catch-up contribution of $11,250 in 2025 as opposed to the standard catch-up provision of $7,500. These contributions can be made on a pre-tax or Roth basis, as permitted by the plan.

IRA Contributions:

• For 2025, IRA contribution limits will remain at $7,000. The IRA catch-up contribution limit for individuals aged 50 and older will also remain at $1,000.
  

2. Traditional IRA Tax Advantages:

Tax Deductibility:

• Contributions to a Traditional IRA may be tax-deductible, depending on your household income and access to an employer-sponsored retirement plan.

Immediate Tax Relief:

• Deductible contributions can lower your taxable income in the year you contribute.

Tax-Deferred Growth:

• Growth in a Traditional IRA is tax-deferred until withdrawals, which are taxed as ordinary income.

3. Roth-Only Rule for High-Earner 401(k) Catch-Up Contributions in 2026:

High-Earner Rule:

• Starting in 2026, high earners (those earning $145,000 or more in the previous year, indexed for inflation) must make 401(k) catch-up contributions to a Roth account.

Key Takeaways:

• Immediate Impact: Contributions are made with after-tax dollars, increasing your taxable income for the year.
• Long-Term Benefits: Roth contributions grow tax-free, and qualified withdrawals in retirement are also tax-free. This makes Roth accounts an attractive option for those expecting to be in higher tax brackets in the future.

What You Can Do Now:

• Review contribution limits: Confirm the 2025 limits for your specific accounts.
• Understand tax implications: Consider how contributing to a Traditional IRA, Roth IRA, or Roth 401(k) fits into your overall tax strategy.
• Talk to your employer: Ensure your workplace retirement plan includes Roth 401(k) options if you’re a high earner.
• Make your 2024 IRA contributions: 2024 IRA contributions can be done any time before April 15th, 2025, or whenever you file your tax return, whichever is sooner.
• Contact your AOG Wealth Management advisor: Your AOG team can help you optimize contributions and tax strategies under these new rules.

Conclusion:

• SECURE 2.0 is reshaping retirement planning for 2025, bringing both challenges and opportunities. Whether you're contributing to a Traditional IRA, Roth IRA, or 401(k), staying informed will help you maximize your savings and prepare for a secure retirement. We recommend reviewing these changes with your CPA or tax professional.