At the end of 2022, Congress passed over 90 changes to the tax code. One of them is particularly interesting because it allows people between the ages of 60 and 63 to contribute more to their retirement accounts than anyone else, at any age.
Is A Reverse Donut Hole A Cinnamon Roll?
Perhaps you have heard of the donut hole? For years, the media, financial planners and the public have called a Medicare coverage gap the “donut hole.” In fact, most Medicare Part D plans have a coverage gap. If you spend more than $4,660 on medicine in the year 2023, then expenses after this are in the donut hole. You must pay 25% of the drug costs in the donut hole, which is difficult because it usually affects at-risk people who have the most expensive medicine! So that’s a bummer.
However, the tax law changes which we are talking about here are the opposite of a bummer, they are a benefit! The reverse of a donut hole. Could that be called a cinnamon roll?
Ages 60-63 Receive A 150% Catch-Up Contribution Limit
If you are contributing to a retirement plan, you have a maximum contribution limit. And, if you are over the age of 50, then you can contribute even more to your retirement plan. This additional amount is called the catch-up contribution.
Beginning in the year 2025, workers ages 60, 61, 62, 63 are able to contribute the greater of 150% of the catch-up contribution or $10,000 into a 401k plan. The 2023 catch-up contribution for everyone else is $7,500. However, for those in the “cinnamon roll” ages of 60-63, they may contribute $11,250 in addition to the usual 401k contribution limits. Once a person hits age 64, the contribution amount drops back to the regular catch-up limits.
Get more information about the most recent contribution limits and catch-up amounts for all of the most popular retirement plans, including 401k plans, 403b plans, SEP IRAs, Simple IRAs.
In conclusion, the benefits for working people between the ages of 60-63 are sweet. You get to contribute one-and-a-half times as much more than every other worker age 50 or over.