Core Insights - Many individuals face challenges in saving adequately for retirement at different life stages, often due to financial burdens such as student debt, home purchases, and childcare costs [1] Group 1: Catch-Up Contributions - Individuals aged 50 and older can make catch-up contributions to their retirement accounts, which are not limited by the amount already saved [2] - Starting in 2026, a significant change will occur regarding catch-up contributions, particularly affecting higher earners [3][5] Group 2: New Rules in 2026 - Currently, workers under 50 can contribute up to $23,500 to a 401(k), while those 50 and over can contribute a total of $31,000, including a catch-up contribution of $7,500 [4] - From 2026, individuals earning over $145,000 will only be allowed to make catch-up contributions using after-tax dollars, which may initially seem disadvantageous [5][6] Group 3: Benefits of Roth Contributions - Despite the perceived drawbacks of mandatory after-tax contributions, there are significant benefits to having funds in a Roth 401(k), including tax-free investment gains and tax-free withdrawals in retirement [8] - This structure provides greater flexibility in managing tax liabilities during retirement compared to traditional 401(k) accounts [8]

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]