Since 2002, retirement savers age 50 and over have had the option of making “catch-up” contributions to their 401(k) plans, which stack on top of the regular limits for employee contributions to tax-deferred retirement plans. The amounts were limited to $1,000 per year when they first came out but expanded to $7,500 by 2025. In addition, contributions to tax-deferred retirement plans are excluded from adjusted gross income, resulting in a lower tax bill on income that would otherwise be taxed. For exampl ...

Don't let your savings efforts go to waste.The money to fund your retirement has to come from somewhere. And you shouldn't expect it to come from Social Security alone.Those benefits might replace about 40% of your pre-retirement income if you earn an average paycheck. But most retirees need considerably more than 40% of their former pay to live comfortably. And it's important to save on your own to bridge that gap. If you have access to a 401(k) plan through your job, you have a prime opportunity to build ...

With the arrival of tax season, if you are thinking of rolling your 401(k) into a Roth account, financial guru and money expert Suze Orman says you might want to think twice — especially if you’re considering a massive conversion. When Gina, a 56-year-old retiree, phoned into the Women & Money podcast, Orman didn’t mince words. After Gina laid out her strategy — moving her $1.6 million pretax 401(k) into a Roth 401(k) and eventually rolling it into a Roth IRA — Orman dismissed the idea, calling it “craz ...

KaterinaDalemans / Envato Think your Social Security check is yours to keep? Think again. Nearly half of all beneficiaries have some form of tax liability on their benefit payment, according to Pew Research. Simply put, if you earn a middle to high income, you’re likely to owe some of your benefits back to the government (1). Must Read Depending on your family’s combined provisional income, you could owe taxes on either 50% or 85% of your benefits (2). As of 2026, the combined provisional income thres ...

Robert Brokamp: Choosing the right retirement account and the long-term return of gold. That and more on this Saturday Personal Finance edition of Motley Fool Money. I'm Robert Brokamp, and this week, I speak with financial planner and CPA Sean Mullaney about why some investors should favor pre-tax traditional retirement accounts, despite all the benefits of Roth accounts. But first, hear a few items from the news last week. First up, we turn to the latest weekly asset allocation review from Jurrien Timmer, ...

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 - Roth retirement accounts offer tax-free withdrawals and do not impose required minimum distributions, but they may not be suitable for everyone [1][3] Group 1: Myths about Roth Accounts - Myth 1: Roth accounts are beneficial for all retirees; in reality, they may not be advantageous for those expecting a lower tax bracket in retirement [3] - Myth 2: Withdrawals from Roth accounts can be made without penalties at any time; only principal contributions can be withdrawn penalty-free, not gains [4][5] - Myth 3: It is best to have all retirement savings in a Roth account; having taxable savings can provide benefits, such as tax breaks on charitable donations and potential future tax credits [6][8]

Core Points - Roth IRAs allow tax-free withdrawals of contributions and earnings at retirement, provided five years have passed since the first contribution [1][4] - Beneficiaries of Roth IRAs do not owe taxes on inherited accounts, making them advantageous for estate planning [2] - Early withdrawals of investment earnings may incur income tax and a 10% penalty, although exceptions exist for certain qualified expenses [3][5] Contribution and Income Limits - In 2026, the contribution limit for Roth IRAs is set to increase to $7,500, with an additional catch-up contribution of $1,100 for individuals aged 50 and older [9] - Single filers can contribute to a Roth IRA if their modified adjusted gross income is below $153,000, with reduced contributions allowed up to $168,000; for married couples filing jointly, the limits are $242,000 and $252,000 respectively [16] Investment Options and Strategies - Roth IRAs can be used for a variety of investments, including stocks, mutual funds, and ETFs, which typically offer higher returns compared to traditional bank accounts [3][18] - The Roth IRA is a favorable option for rolling over funds from a Roth 401(k), allowing for broader investment choices without tax liabilities [8] Comparison with Traditional IRAs - Unlike traditional IRAs, Roth IRAs do not provide an upfront tax deduction, but allow for tax-free withdrawals in retirement [6][13] - Traditional IRAs have no income restrictions for contributions, but tax deductions are subject to income limits if the individual has a retirement plan at work [14][17]

Core Insights - Many individuals face regrets regarding required minimum distributions (RMDs) from traditional IRAs and 401(k)s as they approach retirement age, while Roth IRAs and 401(k)s do not have RMDs [1][2] Group 1: RMDs and Their Implications - RMDs can significantly reduce the balance of retirement accounts, limiting tax-advantaged growth [2][6] - These mandatory withdrawals can increase tax liabilities and potentially raise taxable income, affecting Medicare premiums [2][6] Group 2: Positive Perspectives on RMDs - RMDs can be viewed as an opportunity to enhance retirement enjoyment, even if the funds are not needed for living expenses [3][4] - Strategic planning with professionals can help retirees utilize RMDs effectively, such as funding vacations or hiring services to ease household burdens [5][7]

Core Insights - The 401(k) contribution limits for 2026 will increase to $24,500 from $23,500 in 2025, with catch-up contributions for individuals aged 50 and over rising to $8,000 from $7,500 in 2025 [2] - A significant change for higher-income earners is that starting in 2026, catch-up contributions for those earning over $145,000 will need to be made to Roth 401(k)s, impacting retirement planning strategies [3][4] Contribution Limits - The standard contribution limit for 401(k)s in 2026 is set at $24,500, an increase from $23,500 in 2025 [2] - Catch-up contributions for individuals aged 50 and over will increase to $8,000, while those aged 60 to 63 will have a catch-up limit of $11,250, unchanged from 2025 [2] Impact on Higher-Income Earners - Higher-income individuals earning over $145,000 will be required to make catch-up contributions to Roth 401(k)s starting in 2026, which may lead to increased taxable income in the following tax year [3][4] - This change necessitates a reassessment of retirement planning for higher-income earners who previously relied on pre-tax contributions [3] Roth 401(k) vs. Traditional 401(k) - Contributions to Roth 401(k)s are made with after-tax income, while traditional 401(k) contributions are made pre-tax, reducing taxable income [5] - Withdrawals from Roth 401(k)s are tax-free, and there are no required minimum distributions (RMDs) for Roth accounts [5]