Summary
Starting in 2023, Americans aged 50 and over earning $150,000 or more will need to make their catch-up contributions to Roth 401(k) accounts, meaning these contributions will be taxed up front. This change is due to the SECURE 2.0 Act of 2022 and does not affect standard retirement contributions or those earning below the income threshold.
Key Facts
- New rules apply to workers aged 50 or older earning $150,000 or more.
- Catch-up contributions must now go to Roth 401(k) accounts with already-taxed income.
- The change stems from the SECURE 2.0 Act of 2022.
- Standard contributions remain unchanged and are still tax-deferred.
- Workers below the $150,000 income threshold are not impacted by this rule.
- Roth 401(k) contributions are taxed now, but withdrawals in retirement are tax-free.
- The requirement is based on prior year's W-2 earnings.
- Roth accounts offer more flexibility in retirement due to tax-free withdrawals.
