How America Saves report<\/a>. More plans have likely added the Roth option over the past year in response to the impending change on catch-ups, but it\u2019s possible that some 401(k) plans will continue to offer traditional tax-deferred contributions only. That could mean that 401(k) investors whose plans don\u2019t offer a Roth option wouldn\u2019t be able to make a catch-up contribution at all.<\/p>\nParticipants whose 401(k) plans don\u2019t offer a Roth option and are therefore shut out of catch-up contributions should consider making a full IRA contribution in addition to their baseline 401(k) contributions ($24,500); the IRA contribution limit for people over 50 is $8,600 in 2026. (The IRA contribution limit is $7,500 for people under 50.) And if they\u2019re in a position to invest even more than that, they can steer the overage to a taxable brokerage account.<\/p>\n
A separate issue is how 401(k) investors should proceed if their goal is to make traditional tax-deferred contributions rather than Roth; Secure 2.0 forces higher-income older workers into Roth, at least with the catch-up portion of their contributions. In that case, workers can contribute the base 401(k) contribution limit ($24,500) to the traditional tax-deferred option, with catch-up contributions directed to the Roth option.<\/p>\n
Higher SALT Deduction Amounts<\/p>\n
Thanks to OBBBA, taxpayers can deduct a higher amount of state and local taxes than they could before. The SALT deduction cap had been $10,000, but OBBBA adjusted that upward to $40,000 starting in 2025. The cap will revert to $10,000 starting in 2030.<\/p>\n
Potential Action Items: This one wouldn\u2019t seem to have any connection to retirement, except that the amount of SALT that\u2019s deductible phases out for higher-income taxpayers\u2014those with modified adjusted gross incomes of more than $500,000\u2014and goes back to $10,000 for those with MAGI of more than $600,000. Because there\u2019s a big difference between a $40,000 deduction and a $10,000 one, high-income earners should consider steps to come in under that $500,000 phase-out range if they\u2019re close. They might favor contributions to their traditional tax-deferred retirement plans rather than Roth, for example, as well as max out their health savings accounts, if they\u2019re qualified to contribute; both steps reduce MAGI. Qualifying for the higher SALT tax deduction might also argue against strategies that increase income, such as converting traditional IRAs to Roth IRAs.<\/p>\n
Of course, it\u2019s important to not miss the forest for the trees. While being able to deduct a bigger share of SALT may be tantalizing for people in high-tax geographies, strategies like making Roth contributions or converting IRAs might make sense long-term, even if they curtail the deductibility of SALT.<\/p>\n
Senior Deduction<\/p>\n
Starting this year and running through 2028, people who are at least 65 will be able to take advantage of a new $6,000 deduction. The deduction will be available to both itemizers and non-itemizers, and it doubles to $12,000 for married couples filing jointly, assuming both partners are 65. For non-itemizers, it\u2019s important to note that the new deduction would stack on top of already available standard deductions.<\/p>\n
In 2026, the standard deduction is $16,100 for single filers, plus an additional $2,050 deduction for single people over age 65. Thus, the new deduction for single filers over 65 would amount to $24,150 ($18,150 plus the new $6,000 deduction), and $47,500 for married couples filing jointly, assuming both partners are 65. For married couples, the $47,500 comes from the baseline standard deduction of $32,200, plus the already existing $1,650 per person extra deduction for married people over age 65, and the new $12,000 deduction for couples who are 65-plus.<\/p>\n
Higher-income seniors should take note, however: Income limits apply. The deduction is reduced for single filers with modified adjusted gross incomes of more than $75,000 and married couples filing jointly with MAGI of more than $150,000, and it goes away entirely for singles with MAGI of more than $175,000 and married couples filing jointly with MAGI of $250,000 or more.<\/p>\n
Potential Action Items: The extra over-65 deduction is available to both itemizers and non-itemizers, meaning that taxpayers won\u2019t need to strategize to be able to take advantage of it. However, the income limits are apt to limit its utility to higher-income seniors. For early retirees who have a lot of control over their taxable income levels because they\u2019re not yet receiving Social Security or subject to required minimum distributions, it might be tempting to try to keep modified adjusted income down to qualify for the full deduction. But it\u2019s wise to balance those aims alongside other worthwhile tactics in those early-retirement years, such as converting traditional IRA balances to Roth.<\/p>\n","protected":false},"excerpt":{"rendered":"For retirement savers and retirees, the ringing in of the new year will bring more than the usual…\n","protected":false},"author":2,"featured_media":174439,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[138,246,111,139,69,244,245],"class_list":{"0":"post-174438","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-new-zealand","11":"tag-newzealand","12":"tag-nz","13":"tag-personal-finance","14":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/174438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=174438"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/174438\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/174439"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=174438"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=174438"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=174438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}