Peter Thiel’s $5 billon tax-free account spurred a new 401(k) rule that now impacts high-earning Americans over 50

Core Points - The SECURE 2.0 Act introduces a significant change for older workers earning above $145,000, requiring them to make catch-up contributions on a Roth (after-tax) basis starting in 2026, while others can still opt for pre-tax contributions [1][2][4] - This legislative change aims to increase federal revenue in the short term while allowing high earners to build tax-free retirement savings over time, reflecting a bipartisan effort to enhance retirement benefits [2][3] Summary by Sections Legislative Background - The change is part of Section 603 of the SECURE 2.0 Act of 2022, which mandates that catch-up contributions for those aged 50 and older who exceed the income threshold be designated as Roth contributions [2] - The legislation was influenced by concerns over tax-free accounts held by high earners, notably highlighted by investigations into Peter Thiel's substantial tax-free retirement account [2] Income Threshold and Regulations - The earnings threshold is set at $145,000 of prior-year FICA wages, indexed for inflation, and the Treasury and IRS are tasked with issuing regulations to implement this change across various retirement plans [3] - Compliance with the Roth catch-up requirement will begin with the 2026 tax year, although plan sponsors may adopt earlier interpretations during a transition period [4] Contribution Limits - For 2025, the employee deferral limit is $23,500, with a standard catch-up contribution of $7,500 for those aged 50 and older, and a new "super" catch-up of $11,250 for ages 60-63 [4] - These contribution limits are crucial for retirement planning for near-retirees starting in 2025 and beyond [4]