Core Points - The IRS has introduced a new rule requiring Americans aged 50 and older earning at least $145,000 to make catch-up contributions to a Roth 401(k) starting in 2026, marking the first mandatory Roth provision in the tax code [1][4] - Catch-up contributions for those aged 50 and older will allow an additional $7,500 annually, raising the total contribution limit to $31,000 in 2025, with further adjustments expected for inflation in 2026 [2][3] - Individuals aged 60 to 63 can contribute an extra $3,750, bringing their total allowable contribution to $34,750 for the year [3] Tax Implications - Roth 401(k) contributions are made after-tax, meaning no upfront tax deduction, but withdrawals are tax-free, prompting older savers to reassess their tax situations [2][5] - The value of tax-free withdrawals from Roth 401(k) accounts increases if future tax rates rise, while a decrease in tax rates could make prior higher taxes less favorable [7] - If tax rates remain unchanged, the choice between traditional and Roth 401(k) contributions may not significantly impact the final amount available for retirement [7]
New 401(k) catch-up rule may hit older high earners in 2026
Yahoo Financeยท2025-09-30 17:58