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Need to Know: Retirement Planning Catch-Up Contribution Changes from SECURE 2.0


SECURE 2.0 means big changes for retirement planning

As we've shared, SECURE 2.0 will continue to bring major changes to the retirement planning landscape. In 2024, there will be significant changes to regulations on catch-up contributions, especially for high-income taxpayers earning more than $145,000/year.


What is the current retirement planning law for catch-up contributions?

Under current law, individuals who have reached age 50 and older are permitted to make additional catch-up contributions to retirement accounts. For company-sponsored retirement plans (including 401(k)s and 403(b) plans), the catch-up contribution limit is $7,500 in 2023. The $7,500 catch-up contribution limit is indexed for inflation.


What's changing in 2024?

Under SECURE 2.0, starting in 2024, if the taxpayer has an income of at least $145,000 for the year, the catch-up contribution must be treated as a Roth contribution. That means:

  • These funds are contributed with after-tax dollars, so they will not reduce current taxable income,

  • These funds can be withdrawn tax-free in the future.

  • The $145,000 income threshold will also be indexed for inflation in future years.

What does this mean for you?

Not every 401(k) and 403(b) sponsor currently offers a Roth contribution option in connection with their traditional plan, which means that business owners must first contact their plan recordkeeper to request the changes, which can sometimes take months to be implemented.


If business owners wish to give their high-income employees the option of taking advantage of the new and expanded catch-up contribution rules, they must proactively amend their plans to include this Roth contribution option.


This change can take time, so waiting until the last minute might mean you miss the opportunity to offer a catch-up option for 2024.

Want to make sure your catch-up contribution options are aligned with SECURE 2.0?




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