Catch Up Contribution Changes | SECURE Act 2.0 | OH IN KY

Catching Up on Catch-Up Contributions – What You Need to Know

Published on by Beth Germann in Tax Services

Catching Up on Catch-Up Contributions – What You Need to Know

Changes to catch-up contribution rules stemming from the SECURE Act 2.0 are mind-blowing – and now’s the time to figure out how you’re going to adjust your strategy for the new policies. Here’s what you need to know.

How catch-up contributions work now

Under current regulations, the typical 401(k) contribution limit is $22,500 annually. Taxpayers age 50 or older can add an additional catch-up contribution of $7,500, which allows you to increase your annual 401(k) contribution from $22,500 annually to $30,000, tax-deferred until withdrawn after retirement.

New ROTH rules

Now for the 2026 changes: the new regulation states that if an employer pays you over $145,000 a year, then your catch-up contributions must go into a ROTH side of your 401(k) – which means that catch-up contributions can no longer be a deduction or tax-deferred – you’ll have to pay taxes on that money now.

Why the change?

The new ROTH requirement for catch-up contributions is so that the IRS can collect taxes now rather than later. In the wake of the pandemic and the massive amount of relief money poured into the economy, the federal government is looking for revenue, and this change is intended to enforce just that.

Some loopholes to know about

As the law is currently written, there are a few ways to potentially get around the new ROTH requirement. If you earn wages from different companies, the new rule wouldn’t apply (unless the wages from a single employer totaled more than the $145,000 annual limit). Another exception would be those who are self-employed, earning from multiple employers or clients.

More changes in 2025

Beginning in 2025, taxpayers aged 60 to 63 will be able to make even greater catch-up contributions: the limit increases to either $10,000 or 150% of the standard catch-up contribution, whichever is greater. But the ROTH requirement is still in play, so that money will be taxed on the front end rather than at withdrawal (again, this applies only to taxpayers earning more than $145,000 annually).

Time to make your move

Regardless of how the changes might impact your retirement savings plan, the time to adjust your strategy is now. Talk to one of our top wealth management pros for insights on focusing your financial future. You may also be interested in the CPA Advantage – why having a financial advisor who’s also a CPA can balance your investment returns and your tax position. Maybe you’d like to know more about cash balance plans or how tax-managed accounts can offset capital gains from the sale of a business. Contact us – we’re here to help.


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