A change in the SECURE Act 2.0 that mostly affects higher earners who contribute to their qualified workplace plan, and make age 50 catch-up contributions, has been delayed until January 1, 2026. Starting in 2024, the change would have affected those earning wages of more than $145,000, who contribute to their 401(k), 403(b), or 457(b) workplace plan, and make the age 50 catch-up contribution. The change will require that the catch-up contribution amount be made as a Roth contribution. This mandatory Roth catch-up contribution requirement has now been delayed until 2026.
IRS Notice 2023-62 provides for a two year administrative period to delay the implementation of the mandatory Roth catch-up contribution for certain high earners. It also clarifies and corrects a drafting error in the SECURE Act 2.0 that would have prevented any employee participant from making a catch-up contribution starting in 2024. That was clearly a drafting error on the part of Congress.
Interestingly, the Notice also clarifies that self-employed individuals who make over and above the $145,000 threshold will not be required to make Roth catch-up contributions. For now, it seems they will have an option.
If you are in this category and didn’t know if this would affect you for 2024, you can relax a little. You now have two additional years to plan. That said, if you are able to make Roth contributions, this is something you should seriously consider. The longer a Roth account has to grow, the better. Think of all that future tax-free income!
If you are not sure if this affects you, reach out to me. As an independent CERTIFIED FINANCIAL PLANNER™, I can help you determine your best course of action. Contact me and let’s get started on creating some tax-free money for your future. #talktometuesday #financialplan #letsmakeaplan #CFPPro #todolist #moneydolist #Roth #saving #investing #money #retirement #retirementincome