Plan for Retirement

OBBBA heralds changes that will influence how Americans save for retirement and other long-term goals. Lower income rates. Higher contribution limits. Enhancements to SIMPLE IRAs and SIMPLE 401(k) plans. The steps you take today to prepare for retirement will shape your financial picture during your later years.

You have a variety of retirement savings vehicles to which you can contribute, depending on what your employer offers. These vehicles include traditional and Roth IRAs, Simplified Employee Pensions (SEPs), SIMPLE plans, as well as 401(k), 403(b), and 457 plans.

Contributing to most of these retirement vehicles may reduce your taxable income today while your money potentially grows tax-deferred over time. Time is key. The longer you contribute, the more likely you'll be prepared for the retirement you want. At a bare minimum, you should try to contribute enough pay to take advantage of the maximum match your employer may make to your 401(k) account.

SMART MOVE: Take full advantage of any employer 401(k) or other retirement savings plan, flexible spending account, health savings account, and health reimbursement arrangement available to you.

Alternative Investments in 401(k) Accounts

A 2025 Executive Order could change the way 401(k) plans look in the future. For the first time, 401(k) plan participants may be able to access investments such as private equity, real estate, infrastructure, and even digital assets, options that have been largely out of reach until now. Guidance is expected from the Department of Labor and the Securities Exchange Commission before plan sponsors can offer the investments. When they are available, be sure to consult with your trusted advisor to determine whether these investments will help you achieve your retirement goals before investing your plan assets.

Enhancements to SIMPLE PLANS

OBBBA increases the contribution limits for SIMPLE IRAs and SIMPLE 401(k) plans (see table), including higher elective deferrals and catch-up contributions, particularly for individuals aged 60–63. Employers may also make additional nonelective contributions beyond the standard 2% nonelective or 3% matching contributions.

Rollovers from 403(b) plans to SIMPLE IRAs are now permitted, consistent with prior legislative changes. These enhancements are designed to increase contributions and provide greater flexibility.

SMART MOVE: When changing jobs, roll over any retirement funds directly into an IRA to avoid tax and potential early withdrawal penalties and keep your retirement money savings working for you.

Roth IRAs

Roth IRAs offer several advantages you can't find in other retirement accounts. While contributions are after tax, qualified distributions are tax-free, and there are no required minimum distributions during your lifetime. Contributing to a Roth IRA makes sense if you don't need the tax deduction now or want tax-free distributions later. Tax-free income from a Roth IRA may permit you to leave other retirement accounts alone until you must take RMDs from them.

SMART MOVE: Talk with your trusted advisor about converting a large plan balance to a Roth IRA over multiple years. This helps you "fill up" lower tax brackets without spilling into higher effective rates triggered by phase-outs. The interplay of deductions, surtaxes, and multi-year income planning makes DIY conversion planning a risky endeavor.