08/26/2023
$30K Annual Retirement Contributions Until 2026
Richard Rubin of the Wall Street Journal reports today that high earners making $145K+ who are age 50+ will get until 2026 to use pretax dollars for all of their retirement savings in 401(k)s and similar plans. This additional 2-year extension gives more flexibility to workers trying to decide how to plan their retirement savings.
The change enacted by Congress last year will force high earners to put so-called catch-up contributions into Roth-style accounts funded with posttax dollars. The law applies to workers who made more than $145,000 in wages during the prior year and who wish to contribute more than the general maximum for 401(k)s.
Under current law, contributions to 401(k) and similar plans are capped at $22,500. But savers ages 50+ can make catch-up contributions beyond that with eligible workers allowed to put an extra $7,500 into their accounts, for a total of $30,000 this year and up to 2026.
Matthew Petersen, executive director of the National Association of Government Defined Contribution Administrators, applauded the delay. “Today’s guidance is an excellent example of the results of an open, fair and considerate process.”
The IRS also resolved a potential glitch in legislation that had been worrying some investors and retirement-industry companies, who understood that last year’s legislation inadvertently banned all catch-up contributions. The IRS clarified on 8/26/23 that this isn’t the case.
Siobhan Kierans
FIC 8/26/23
