Changes to IRA regulations are key for retirees and future investors, affecting their financial planning. The IRS recently announced some significant updates to IRA rules that will reshape how many manage their retirement savings in the coming years. Staying updated on these rules will ensure you maximize the benefits and avoid unnecessary penalties.
New IRS 10-year rule for inherited IRAs
One major change involves a new 10-year rule for inherited IRAs. For non-spouse beneficiaries, the IRS requires that inherited IRAs must be emptied within ten years of the original owner’s passing. This rule excludes some exceptions like lifelong disability. Previously, beneficiaries could wait until the 10th year to withdraw all funds, but now annual withdrawals are expected, adding tax implications.
Bigger catch-up contributions for those aged 60-63
In 2025, individuals aged 60 to 63 will benefit from enhanced catch-up contribution limits. Workers can now contribute up to $10,000, or 150% of the regular catch-up amount, whichever is higher, into their retirement accounts. This allows older workers to boost their savings just before retirement, a critical period for ensuring financial stability.
Potential increase in contribution limits
Although the IRS hasn’t confirmed contribution limits for 2025, predictions indicate a potential increase to keep pace with inflation. The current contribution limit for 2024 stands at $7,000, with an additional $1,000 for those 50 or older. If contribution limits rise, it would give workers greater opportunities to save.
| Year | Regular Contribution | Catch-up Contribution (50+) | Catch-up (60-63) | Maximum Limit for IRAs |
|---|---|---|---|---|
| 2023 | $6,500 | $1,000 | Not Applicable | $7,500 |
| 2024 | $7,000 | $1,000 | Not Applicable | $8,000 |
| 2025 | Estimated increase | $1,000 | $10,000 | To Be Announced |
FAQs
What is the new 10-year rule for inherited IRAs?
The new rule requires most non-spouse beneficiaries to empty an inherited IRA within ten years of the original owner’s death, with annual withdrawals.
Are catch-up contributions changing for all age groups?
No, the new rule specifically allows people aged 60-63 to contribute more than those aged 50-59, up to $10,000 or 150% of the regular limit.
Will contribution limits definitely increase in 2025?
The IRS has not officially confirmed the limits for 2025, but there are strong indications that they may rise to keep up with inflation.
