This Law Can Help You Maximize Your Retirement Income
Saving wisely for retirement can be the difference between having enough money to live the life you want and struggling to get by. For retirees, another strategy that can help boost your savings is to hold contributions to retirement savings accounts.
Catch-up contributions allow savers age 50 or older to invest in their retirement savings accounts in excess of the IRS’s standard limit. But few qualified nurses are taking advantage: Vanguard’s “How America Saves 2025” report found that only 16% of respondents age 50 or older made contributions to their plans by 2024.
Knowing how much you can contribute to your portfolio by the time you turn 50 can help you build your nest egg faster. These rules are designed to help you save money in the future, allowing you to reduce your tax liability and grow your portfolio at the same time.
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The power of holding donations
Catch-up contributions allow savers age 50 or older to increase their annual contribution limits for their 401(k) and individual retirement account (IRA) plans. Increasing your regular contributions and catch-up contributions acts as a sprint to the finish line in your pre-retirement years. Withholding contributions can also help lower your tax bill since contributions to 401(k)s and traditional IRAs are tax deductible.
The IRS determines how much withholding contributions can be each year, just as it does with regular contributions. Be sure to check the rules and make sure you qualify before donating.
Because of the latest law, high earners — those who make more than $150,000 a year — are required to make their catch-up contributions as Roth contributions. Roth contributions are made with after-tax dollars, but you won’t have to pay taxes on qualified withdrawals of your benefits.
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Don’t forget about RMDs
Required minimum distributions (RMD) are mandatory withdrawals from tax-deferred retirement savings accounts, including 401(k)s and IRAs. Savers must take RMDs at age 73, or 75 if born in 1960 or later.
It’s important to keep RMDs in mind when planning for retirement and making contributions to your savings accounts. RMDs are taxable, so they’re important to consider when planning your retirement taxes. While tax-deferred accounts come with RMDs, Roth accounts do not.
Check your employer’s plan to make sure you are using matching contributions and withholding contributions in a way that makes sense for your retirement and tax planning. Increasing your contributions can help you make more of your hard-earned money now so you can access it for a comfortable retirement later.
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