The IRS and Department of the Treasury finalized rules last week for provisions to a 2022 law that set the threshold for high earners at $145,000 (Getty Images) <\/p>\n
Changes are coming to \u201ccatch-up\u201d contributions under 401(k)<\/a> retirement<\/a> plans for employees aged 50 or older who are considered \u201chigh earners.\u201d<\/p>\n The Internal Revenue Service<\/a> and the U.S. Department of the Treasury finalized the rules last week for several provisions from the Secure 2.0 Act of 2022, which set the threshold for a high earner at more than $145,000 in wages<\/a>, according to the Wall Street Journal. <\/a><\/p>\n Invest in Gold <\/p>\n Powered by Money.com – Yahoo may earn commission from the links above. <\/p>\n The change means that in 2027, workers aged 50 and older who earn $145,000 or more must make their 401(k) contributions after paying taxes. Some plans, however, may make the change in 2026 \u201cusing a reasonable, good faith interpretation of statutory provisions,\u201d the IRS said<\/a> in a press release.<\/p>\n Under the new rule, high earners will be paying taxes<\/a> on their catch-up money<\/a> during their high-earning years, as opposed to during retirement, when their income is typically less.<\/p>\n The IRS allows people ages 50 and up to put an extra $7,500 in their 401(k) plans before hitting pre-tax limits as a \u201ccatch-up.\u201d All money in a Roth account can be withdrawn tax-free.<\/p>\n However, that perk will vanish for \u201chigh earners\u201d who make over $145,000. Those savers could now lose a nearly $4,000 deduction for an $11,250 super catch-up contribution, according to the report.<\/p>\n Those worst off thanks to the change are high earners without a Roth 401(k) \u2014 as they won\u2019t be able to make any catch-up contributions at all.<\/p>\n With catch-up contributions, people who are 50 or older can contribute an extra $7,500 on top of the basic $23,500 limit for 2025.<\/p>\n Meanwhile, a super catch-up option has allowed people between the ages of 60 and 63 to increase their catch-up contribution to $11,250.<\/p>\n Contribution limits are adjusted each year for inflation. In 2026, the catch-up limit is expected to be about $8,000, while the basic limit is expected to stay the same at $11,250.<\/p>\n The IRS and Department of the Treasury finalized rules last week for provisions to a 2022 law that set the threshold for high earners at $145,000 (Getty Images) <\/p>\n