Are You 60 to 63? You Just Got a HUGE 401(k) Retirement Benefit—But It’s Temporary!

The super catch-up contribution for your 401(k) is here. Now this was originally passed as part of the SECURE Act 2.0 a couple of years ago but just now is going into effect in 2025. We’re going to go through the limitations of the super catch-up contribution, the amounts, and also some quirks like most things that came out of the SECURE Act that will apply to you potentially that you want to be aware of. We’re going to cover it all in this video.

401(k) Contribution Basics

Let’s start with a quick refresh on some of the 401(k) contribution rules and then we’ll get to the catch-up in just a minute, super catch-up.

You have a deductible contribution amount. This means your wages, then you make a 401(k) contribution through weekly or bi-weekly payroll check deductions. That money goes into your 401(k). It reduces your income tax. That’s what we mean by deductible contribution. The limit is 23,000. Over the course of the entire work year, you can deduct from your income and not pay taxes on $23,000 of earnings and that money will go into what’s called the pre-tax part of your 401(k). That is the limit if you are under the age of 50. If you are over the age of 50, there is a normal catch-up contribution.

This has been in effect for many years and many of you have taken advantage of this. $7,500. Now we have the super catch-up contribution. This only applies between the ages of 60 and 63. This is one of the first quirks here. Now it’s important to note that it’s your age in the calendar year at the end of the year. Technically if you’re 59 today but will be 60 by December 31st, you are eligible for the super catch-up contribution. Conversely, if you’re 63 today and you will be 64 by December 31st, you are not eligible for the super catch-up contribution.

Why Only Ages 60-63?

That’s the first quirk here. Only for people between the ages of 60 to 63. Do not ask me why. I have no idea why they would just choose this select range and exclude people 64, 65, 66 that are still working and even younger than 60 because we’ve had many clients over the years. You put your kids through school, you’re in your highest earning years in your 50s and you want to save money for retirement but you’re limited to an extent with where you can save because of these really in my opinion arcane type rules. I get why they’re in place.

They don’t want someone sheltering hundreds of thousands of dollars from taxation in any given year but at the same time if you’ve played by the rules, you’ve done everything right your entire career and now you’re finally able to save large sums of money for your retirement, there should be some tax advantages for you. For some reason though here 60 to 63 that’s the age that they’re limiting the super catch-up contribution for. That amount is 11,250. It’s important to not get these confused though. You don’t get to do 23,000, or you do get to do 23,000, but you can’t then also do a normal catch-up of 7,500 plus a super catch-up of 11,250.

Clarifying Contribution Limits

If you’re outside of this age range but over the age of 50, it’s 30,500 total. 23,000 deductible plus 7,500 for the normal catch-up. If you’re in between that special age range of 60 to 63, you can do the 23,000 deductible plus 11,250 for a maximum contribution into the 401(k), pre-tax, or Roth, of $34,250. Another quirk. They’re not cumulative. It’s either-or, and the actual language, how we get to this 11,250, it’s the greater of $5,000 or 150% of the current catch-up contribution. Again, I don’t know why they chose $5,000, but the math works out to where 150% of the current catch-up contribution equals 11,250.

This is indexed for inflation, so it will go up next year, the amount that you can super catch up into your 401(k).

Where Should You Put Your Contributions?

Now we want to help you with helping to decide where to put this catch-up contribution, or at least give you some ideas from a planning perspective, because we are retirement planners. Everyone, if you have a 401(k), you have a pre-tax option. More and more plans these days have a Roth option, and hopefully, you also have an after-tax option inside your 401(k). This would all be one 401(k) account. Call your custodian, your plan administrator, your HR department, and ask, “Hey, do I have a pre-tax, a Roth, and an after-tax account inside of my one 401(k)?”

Money is tracked separately in these three accounts, but here’s where you can really start planning. The most you can put into a pre-tax account, this is the traditional side of your 401(k), you will receive an income tax deduction, so you’ll pay less taxes today, is 23,000 if you’re under the age of 50. If you’re 50 and above, you can put 23,000 plus the catch-up, and if you’re in between that magical 60 to 63 range, you can do 23,000 plus the super catch-up for 34,250, I believe. That is the same amount that you could choose to put inside the Roth part of your 401(k). The big difference here is you will not get a tax deduction today for the monies that you put into the Roth.

They will grow tax-free, and then you can take out all the money you put in plus the growth over time, tax-free in retirement, but you pay taxes today. It’s not an either-or, meaning you don’t have to just choose pre-tax or Roth. You should be able to put a certain amount maybe into the pre-tax, possibly a certain amount into the Roth, you may have to talk with your HR department or the plan administrator on how to set that up, but you should be able to do that. You could also have your employer match go into the Roth now. Last year and all previous years, your employer match always had to go into the pre-tax part of your 401(k).

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New law enacted, you can now request that your match go into the Roth part of your 401(k). You have some choices there, but regardless of your age, once you max out the 23,000 plus the catch-up or super catch-up, you actually can still put more money away for retirement. It just has to go into the after-tax bucket. What’s cool about the after-tax bucket is all of the dollars that you put in, the contributions that you make over the years, your record keeper will keep track of that. If you do 30,000, 30,000, 30,000, 30,000 over a 4-year period, $120,000 of contributions into the after-tax part because you filled these buckets up already, you can roll that 120,000 out, all of the contributions you’ve ever made.

When you retire or sever from service, you can roll those contributions into your own Roth IRA. Now the earnings of the money that you invested here or contributed, and it grew hopefully, those earnings, they will have to be rolled in a separate check into an IRA, a traditional IRA. When you take money out, you’ll have to pay income taxes. The total amount combined that you can put into your 401(k) from deductible contributions plus the employer match plus your catch-up or super catch-up contributions, the total amount cannot exceed $70,000.

Whatever your employer is putting in for the match, whatever you put in if you subtract all that from 70,000, that remaining balance is how much you can deposit into the after-tax account, and then when you retire, roll that into a Roth IRA.

Now we did a video on this. This is otherwise known as the Mega Backdoor Roth IRA. You may have heard that terminology before. All it is, putting money into the after-tax part of your account and then rolling that when you retire into a Roth IRA.

Big Change Coming in 2026

Last quirk here, and this doesn’t go into effect until 2026, which is a year from now.

If your income wages, all income is greater than or equal to $145,000, the catch-up or the super catch-up contribution must go into the Roth part of your 401(k). This year, and this year only, you have the option to put the super catch-up or the catch-up contribution into the pre-tax part of your 401(k). Again, that lowers your taxable income, and when you take it out later, you’ll have to pay income taxes in retirement. Starting in 2026, if your income is greater than 145,000, the catch-up, super catch-up must go into the Roth. They do not give you an option.

As you can see, once you understand some of these 401(k) rules, it’s not too tremendously complex, but it’s important to understand your choices and of course, the rules surrounding those choices so you can make better decisions for your retirement. All of this is about creating visibility for your retirement because you want the big questions answered. Do you have enough? How much can you spend in retirement? How do you pay less tax? If something happens to you, will your spouse be okay? Will your family be okay?

Those are the questions that we answer with the Retirement Success Plan. If you have any questions or simply want a second opinion, we’re here to help. Just simply reach out to us. You can click the link in the description below or just give our office a call. We’re happy to help.

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