Core Points - The IRS announced new regulations affecting 401(k) catch-up contributions starting in 2026, particularly for high-income earners [1][4] - An income test will be implemented, where individuals earning over $145,000 will only be able to make catch-up contributions to a Roth 401(k) [4][5] - This change introduces an upfront tax burden for high-income earners, as contributions to a Roth 401(k) are made with after-tax income [5] Summary by Sections Contribution Limits - For 2025, all workers can contribute up to $23,500 into 401(k) plans, with those over 50 allowed to make additional catch-up contributions [3] Income Test Implementation - Starting in 2026, workers earning over $145,000 will face restrictions on their catch-up contributions, limiting them to Roth 401(k) plans [4] Tax Treatment Differences - Standard 401(k) contributions are made pre-tax, allowing for tax deductions, while Roth 401(k) contributions are made after-tax, resulting in no immediate tax benefits [5] Impact on Workers - Approximately 20% of individuals aged 45 to 54 earn over $100,000, indicating that millions could be affected by the new regulations [6] - Employers are encouraged to confirm if they offer a Roth 401(k) plan, as nearly 93% do [6]

SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. I have a 401(k) with $120,000 in it. I’m 74 and getting the required minimum distribution at the end of each year. Do I need a retirement planner to help handle the withdrawal?  – Susan While technically you don’t need a financial advisor to handle your retirement account withdrawals, it can be useful to talk with one. Between deciding which investments to liquidate, navigating potential tax implications ...

Core Insights - Saving for retirement requires sacrifices, but a substantial IRA or 401(k) balance can lead to a more comfortable lifestyle [1] - Concerns about depleting retirement savings are common, with longevity, market declines, and healthcare costs being significant factors [2][7] Group 1: Longevity - Americans are living longer, which poses challenges for preserving retirement savings; a strategic withdrawal rate is essential [4] - A smaller withdrawal rate, such as 3%, may be more suitable depending on portfolio composition [4] - Delaying Social Security claims can increase monthly benefits by 8% for each year waited, reducing the need to withdraw from savings [5] Group 2: Market Declines - Early market declines in retirement can jeopardize savings, especially if investments are sold at a loss [6] - Maintaining a cash reserve equivalent to two years' living expenses can help weather market downturns [6] - Diversifying the portfolio with stable dividend stocks can mitigate risks associated with market declines [7][8]

The average American’s defined contribution plan retirement savings rate is at an all-time high, according to Vanguard data. Yet at the same time, more Americans are tapping their 401(k)s or similar plans for emergencies. In 2024, 4.8% of plan participants took hardship withdrawals, up from 3.6% in 2023 and 2.8% in 2022, according to Vanguard. Be Aware: Dave Ramsey: The Biggest 401(k) Mistake People Make Check Out: 6 Big Shakeups Coming to Social Security in 2025 So what is driving these hardship withdraw ...

Core Insights - The article discusses the considerations for rolling over funds from a 401(k) to an IRA, emphasizing the potential benefits and drawbacks of keeping retirement savings in cash versus investing them for growth [2][3][6]. Group 1: Rollover Considerations - Rolling over money from a 401(k) to an IRA can provide more investment options and greater control over retirement accounts [7][9]. - Keeping the full balance of an IRA in cash may undermine the benefits of tax-deferred growth, potentially leading to lost earnings and diminished purchasing power over time [2][3]. Group 2: Investment Strategy - It is suggested that if the funds are not needed for regular monthly expenses, it may be more beneficial to keep them invested in the 401(k) rather than moving them to cash in an IRA [2][3]. - Funding a separate emergency fund with disposable income in a regular taxable account could allow retirement accounts to continue growing tax-deferred [3]. Group 3: Tax Implications - Direct rollovers to traditional IRAs are tax-free, but withdrawals will be subject to income tax, while converting to a Roth IRA incurs a current tax bill but allows for tax-free qualified withdrawals [8].

The best investing strategy, particularly for retirement, is to get started as early as you can and as consistently as you can. However, if you’re only starting later in life, how can you catch up? Be Aware: You’ll Run Out of Money in 20 Years’ — Why Retirees Are Rethinking Their Savings Strategy Read Next: 6 Hybrid Vehicles To Stay Away From in Retirement Financial experts offered a plan that actually works, if you follow it. Do These Things Immediately If someone is starting to save later in life, the ...

Core Insights - The article highlights concerns regarding the management of retirement plans, particularly focusing on the Rhode Island 401(a) plan managed by TIAA Financial Services, which has faced scrutiny for potentially predatory practices and conflicts of interest [2][5][6]. Group 1: Retirement Plan Management - Rhode Island officials made a swift decision to change the management of the 401(a) accounts from Vanguard to TIAA in May 2023, with no detailed records of the deliberations available [3]. - TIAA is currently under investigation in three states for allegations of steering retirement savers into costly products, raising concerns about the integrity of the advice provided [5][6]. Group 2: Employee Experiences - Jason Allaire, a participant in the Rhode Island retirement plan, expressed frustration over the restrictions of the 401(a) plan, which he believed was similar to a 401(k) but came with significant limitations [4][5]. - Many employees are reportedly unaware of the complexities and restrictions associated with their 401(a) plans, leading to potential financial disadvantages [16]. Group 3: Regulatory Environment - State regulators are concerned about TIAA's sales practices and the potential conflicts of interest that may affect the advice given to retirement savers [6]. - TIAA has stated that it cooperates fully with regulatory authorities regarding the investigations [6][7]. Group 4: Plan Characteristics - 401(a) plans are designed for government employees and typically offer more modest growth compared to broader investment options, as they are limited to safer investments [8]. - Employers have significant control over 401(a) plans, including determining contribution limits and investment choices [9]. Group 5: Recommendations for Employees - Employees are encouraged to seek comprehensive information about their 401(a) plans, especially when changes in management occur [10]. - Consulting with financial advisors or legal professionals is recommended to understand the terms and conditions of their retirement plans [11].

If you’re saving for retirement through a 401(k), two simple plan features could mean the difference between an average balance and one that’s $50,000 higher. Find Out: Dave Ramsey: The Biggest 401(k) Mistake People Make Read Next: How Far $750K Plus Social Security Goes in Retirement in Every US Region The average 401(k) balance is now $107,430, according to new Bank of America data. But 401(k) participants in plans that use auto-enroll and auto-increase features have an average account balance of $158,0 ...

Core Insights - Financial planners play a crucial role in helping individuals make informed retirement decisions, yet common mistakes persist over time [1][2] Group 1: Common Retirement Mistakes - Choosing the wrong investment allocation can significantly impact retirees, as portfolio construction should evolve with changing financial situations and long-term goals [3][4] - Retirees often make two extreme mistakes: being overly conservative, which limits portfolio growth, or taking excessive risks due to market excitement, potentially leading to substantial losses [4] - Not optimizing for taxes during retirement can result in retirees owing more than necessary, as many are unaware of the control they have over taxable income and its timing [5][6] Group 2: Tax Planning Strategies - Effective tax planning should consider not only the current year but also the next 15 to 20 years, potentially saving retirees 10% or more in taxes [7]

Core Insights - Transferring funds from a 401(k) to a Roth IRA can help retirement savers manage their future tax liabilities, especially if they expect to be in a higher tax bracket after retirement [2][4] - Roth IRAs do not have Required Minimum Distribution (RMD) rules, allowing funds to grow tax-free indefinitely, which can be beneficial for tax minimization and estate planning [5][4] - Gradual conversions of 401(k) funds to Roth IRAs can help spread out tax liabilities, making it a popular strategy among retirement savers [6][8] Roth Conversion Concepts - Tax-deferred accounts like 401(k) plans require withdrawals to be taxed as ordinary income and are subject to RMD rules after age 73 or 75 [4] - Converting to a Roth IRA allows individuals to avoid RMDs, thus potentially reducing their overall tax burden in retirement [5] - Immediate taxation on converted funds can lead to significant short-term tax bills, making gradual conversions a more appealing option [6] Hypothetical Scenarios - A 58-year-old with a $1.4 million 401(k) could convert $140,000 annually, resulting in a total taxable income of $240,000 and an annual tax bill of $49,814 [7] - At this conversion rate, it would take approximately 16 years to deplete the 401(k) account, with a total tax bill of $797,024, compared to a one-time tax bill of $507,784 for a full conversion in one year [8]