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 63 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 to those plans as after-tax Roth contributions. 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, under the IRS’s recent notice, taxpayers will have until 2026 before they must comply with this decision. 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 2023, 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.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
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Posted on October 3, 2023