The Secure 2.0 bill enacted at the end of 2022 was such a huge grab bag of goodies that there were bound to be some hitches. One big one — the requirement that catch-up contributions for high earners must go into Roth accounts — is getting a two-year delay, until 2026, to sort out the details, the IRS announced in a new notice. The agency also noted that a line in the bill’s text that seemed to eliminate catch-up contributions for everyone after 2024 was a mistake and wouldn’t be considered.
For people 50 and older who earn over $145,000, this allows some extra time before they have to make any changes. It mostly affects employers, who now have more time to add Roth 401(k) features to their plans, if they didn’t offer them already. But the two-year delay does not mean retirement savers have to wait if they don’t want to. If your employer’s retirement plan offers a Roth 401(k) option, you can easily direct your catch-up contributions that way now, and it might benefit you in the long run. The catch with catch-up contributions is that not many people make them. Even the baseline annual 401(k) contribution limits have always been somewhat aspirational. Vanguard’s latest study says only 15% of workers with a 401(k) contribute the maximum amount, which in 2023 is $22,500. …
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