Mandatory Roth Catch-up Contributions for High Wage Earners - Secure Act 2.0

Michael Ruger - Greenbush Financial Group

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NOTE: Per updated guidance from the IRS in August 2023, the Mandatory Roth Catch-up feature within Secure Act 2.0 will not be effective until 2026. It was originally supposed to go into effect in 2024. This video was filmed prior to the delay.
Starting in 2026, individuals that make over $145,000 in wages will no longer be able to make pre-tax catch-up contributions to their employer-sponsored retirement plan. Instead, they will be forced to make catch-up contributions in Roth dollars which means that they will no longer receive a tax deduction for those contributions.
This, unfortunately, was not the only change that the IRS made to the catch-up contribution rules with the passing of the Secure Act 2.0 on December 23, 2022. Other changes will take effect in 2025 to further complicate what historically has been a very simple and straightforward component of saving for retirement.
Even though this change will not take effect until 2026, your wage for 2025 may determine whether or not you will qualify to make pre-tax catch-up contributions in the 2026 tax year. In addition, high wage earners may implement tax strategies in 2025, knowing that they are going to lose this sizable tax deduction in the 2026 tax year.
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Contact Michael Ruger with Questions: 518-477-6686 or mruger@greenbushfinancial.com
Visit our website: www.greenbushfinancial.com/
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#roth401k #catchup #401k #greenbushfinancial

Опубликовано:

8 янв 2023

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Комментарии : 12

@onlywenilaugh6589 Год назад

To me, 145k is not high earner, especially if in high cost of living areas. Just another way to grab taxes sooner at higher tax bracket folks

@DS-ob3gt Год назад

How are record keepers going to adjust for this

@greenbushfinancialgroup Год назад

My guess is the responsibility for monitoring this new Roth Catch Up is going to fall more heavily on the employer instead of the recordkeeper. Hopefully, the payroll companies will be able to integrate this new restriction into their payroll system so if an employee with over $145K in comp in the previous year tries to make a pre-tax catch-up contribution, the payroll system would reject that pre-tax deduction kind of like the systems do with the 401K EE deferral limits now. (Comment is for education. Not advice)

@brianv7350 Год назад

What about high earners that hit the cap on being eligible to even have a Roth IRA? You’re forced to make catch up contributions that you’re not eligible to make because of income limits?

@greenbushfinancialgroup Год назад

Roth IRA have those special income limits the determine whether or not you are eligible to make a contribution. Roth 401K does not, you can make $1M in W2 and still be eligible to make a Roth 401K EE deferral. (Comment is for education. Not advice)

@alrocky Год назад

Q1 High earners ineligible for direct contribution to Roth IRA may contribute indirectly via *_back door_* Roth IRA process. Q2 You seem to be conflating Roth 401(k) with Roth IRA.

@brianv7350 Год назад

@@alrocky no the implication was that you could use a Roth 401k this way and not a Roth IRA. Why did they force high earners into any Roth type that they aren’t allowed to use because of income limits? Seems like a really stupid move by the government.

@alrocky Год назад

@@brianv7350 Your complaint in your OP was regarding Roth IRA. Catch up as Roth 401(k) for high earners has nothing to do with Roth IRA contributions or Roth IRA catch up contributions. If you balk and decide not to contribute $7,500 to Roth 401(k) catch up because of the tax implication, you will still pay that same tax on $7,500.

@straitjacketstudios Год назад

Does this new (forced) ROTH 401k catchup contributions also counts against your normal external annual ROTH IRA contribution limits?

@greenbushfinancialgroup Год назад

No, the Roth 401k and Roth IRA limits are independent of each other (Comment is for education. Not advice)

@mtmitchell34 Год назад

I am about to turn 50. Making catch up, but so disappointed that after that I can’t take pretax catch up in 2024 because I make slightly too much. My taxes keep going up while rich get breaks. So typical.

@ericeandco Год назад

With the contribution being part pre tax and part post tax, people will probably end up paying double tax. Who’s going to track how it was divided up over the years?