Every year, the Internal Revenue Service (IRS) will make cost-of-living adjustments to American retirement plans, and the changes usually come down to trying to fight inflation by increasing the maximum contribution rates for different types of retirement plans.
This year, however, the IRS will be making some drastic changes as well, according to a recent report from The Week.
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Those four changes are on the way that could affect nearly everyone preparing for retirement with a 401(k) or individual retirement account (IRA) — here are the upcoming changes and what you can do about them:
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Catch-up contributions are an account-friendly retirement savings plan that allows workers over age 50 to increase contributions to their accounts above the standard contribution limit (the 2025 deferral limit will be $23,500).
However, the IRS introduced new changes for donors between the ages of 60 and 66, as they can “give up to $11,250 next year — an additional $3,750 in catch-up contributions,” according to The New York Times.
This means donors aged 60 to 63 can contribute up to $33,750 into their retirement account. If you find yourself in that age group and are able to donate, be sure to donate more in 2025.
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Currently, part-time workers must put in 1,000 hours in a year or 5,000 hours in three consecutive years to qualify for their company’s 401(k) plan.
In 2025 however, the three-year limit will drop to two years – if you’re a part-time worker who’s been waiting to hit the three-year mark, you’ve got one more year to go.
Starting in 2025, any 401(k) plan started after December 29, 2022 will enroll employees — as long as they qualify and don’t opt out.
This saves you the effort of managing a 401(k) yourself, with contribution rates of more than 3% but less than 10% annually.
Until now, any heirs who inherited an IRA were given a “rollover benefit without taking [required minimum distributions] RMDs from their inherited IRAs. “