Core Insights - The IRS has implemented a new rule affecting catch-up contributions to workplace retirement accounts, particularly for high-income earners aged 50 and above, starting in 2026 [1][2] - The change mandates that individuals earning $150,000 or more must make catch-up contributions to a Roth 401(k), eliminating the upfront tax deduction previously available for traditional 401(k) contributions [2][6] - This rule is permanent and based on the prior year's W-2 income, impacting retirement planning strategies for affected workers [5][6] Contribution Limits - In 2026, the contribution limit for 401(k) plans will increase to $24,500, up from $23,500 in 2025 [4] - Workers over 50 can make an additional catch-up contribution of $8,000 in 2026, an increase of $500 from the previous year [5] - Certain plans allow individuals aged 60 to 63 to contribute up to $11,250 as a catch-up contribution [5] Strategic Considerations - Affected workers may benefit from the tax-free earnings and withdrawals associated with Roth accounts after meeting the five-year aging rule [3] - Fidelity suggests that individuals reconsider their retirement savings strategies, potentially exploring health savings accounts (HSAs) or maximizing contributions to traditional and Roth IRAs [7][8][9] - Workers earning less than $150,000 remain unaffected by the new rule and can continue to make catch-up contributions to either traditional or Roth 401(k) accounts [6]

Core Insights - A new savings option called Trump accounts, created under the Working Families Tax Cuts bill, is gaining attention from parents for children's future savings, featuring a $1,000 government seed contribution before any family contributions [1][17] - Contributions to Trump accounts will not start until July 4, 2026, but interest is rising, especially after tech billionaires Michael and Susan Dell pledged $6 billion to fund 25 million accounts [2][17] - Experts note that the concept of Trump accounts is not new, having been proposed under various names over the years [3][17] Trump Accounts Features - Trump accounts are not limited to education expenses; funds can be used for any purpose once the child turns 18, although the money is locked until then with no early access [4][5][7] - Unlike traditional IRAs, Trump accounts do not require earned income for contributions, allowing parents, grandparents, and employers to contribute on behalf of a child [8][17] - Upon turning 18, the account transitions to a traditional IRA, with withdrawals subject to income tax and a 10% penalty for early withdrawals before age 59½ [9][17] Comparison with Other Savings Options - Trump accounts differ from 529 plans, which are specifically designed for education costs and allow tax-free growth when used for qualified expenses; Trump accounts do not offer tax-free growth [10][11] - Coverdell Education Savings Accounts (ESAs) and custodial accounts under UGMA or UTMA rules are alternatives, with ESAs allowing tax-free growth for education and custodial accounts having no contribution limits but affecting financial aid eligibility [12][13][17]

Core Insights - The dependent care flexible spending account (DCFSA) is a tax-advantaged account designed for tax-free savings on adult and childcare expenses, requiring careful planning and adherence to specific rules [1] Group 1: DCFSA Functionality - DCFSA is included in many employer benefits packages, allowing employees to contribute a portion of their paycheck during open enrollment or qualifying life events [2] - Contributions to a DCFSA are made with pre-tax dollars, which can significantly reduce taxable income; for a married couple in the 22% federal tax bracket, potential tax savings could exceed $1,000 [3] - The annual contribution limit for DCFSA is set at $5,000 for 2024 and 2025, increasing to $7,500 starting in 2026 [4][6] Group 2: Fund Management - Unused DCFSA funds typically expire at the end of the calendar year unless the employer offers a grace period of up to 2.5 months for incurring and claiming eligible expenses [5][14] - Employees must estimate their annual expenses ahead of time, as contributions are set during open enrollment, and any unused funds will be forfeited [7] Group 3: Eligible Expenses - Eligible expenses for DCFSA include costs for caring for a child under 13 or a dependent who cannot care for themselves, provided the care allows the employee to work or seek employment [9][15] - Examples of eligible expenses include daycare, preschool, babysitting, and before- or after-school programs, while private school tuition and overnight camps are not eligible [11][17] Group 4: Tax Benefits - Households can combine DCFSA with other tax benefits, such as the child tax credit, which offers up to $2,200 per child, and the child and dependent care credit, which provides up to $3,000 for one dependent or $6,000 for two or more dependents [18][19]