The IRS is providing high-income taxpayers with two years of relief from a Secure Act 2.0 provision that would have required them to begin allocating catch-up contributions to their 401(k)s on a Roth basis beginning in 2024.
Section 603 of the Secure Act 2.0 called for 401(k), 403(b) and 457(b) plan participants age 50 and older with prior-year Social Security wages exceeding $145,000 to designate catch-up contributions as after-tax Roth contributions beginning in 2024. Under these circumstances, employees’ elective salary deferrals would consist of pre-tax dollars to their defined contribution plans and after-tax dollars to the Roth component of the plan.
However, the IRS announced in 2023 it would give taxpayers until 2026 to begin complying with this rule. As a result, individuals age 50 and older may continue making annual catch-up contributions to their employer-sponsored retirement plans with pre-tax dollars in 2024 and 2025, thereby reducing their taxable income for those years.
About the Author: Olga Ismail is the head of Retirement Plan Consulting and a financial advisor with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. She can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
Olga Ismail is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
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Updated on September 24, 2024