Mary Beth’s Corner

Get Caught Up With Catch Up

Roth Catch-Up Contributions

Retirement plan participants ages 50 and above can make catch-up contributions to further take advantage of tax deferral opportunities and help individuals closer to retirement age achieve financial wellness. 

The Cost of Living Adjustments (COLA) limits set catch-up contribution levels at $7,500 for 2023 — meaning workers aged 50 and up can increase their 401(k) contribute amounts from $22,500 to $30,000.

For purposes of this piece, we will cover the New Catch-Up Mandates that will impact the source in which catch-up contributions made (Traditional vs. Roth) and how to best prepare given your specific circumstances:

  • 2024: Catch-up contributions as Roth for some earners
  • 2025: Catch-up contribution limit increase for ages 60-63 (Super Catch-Up)

2024: Catch-Up Contributions as Roth

Catch-up contributions for traditional 401(k) plans are typically made on a pre-tax basis, which lowers taxable income in the year they are made. However, thanks to recent mandates, starting in 2024 participants making above $145,0001 of compensation will have to “Rothify” their catch-up payments.

This means catch-up contributions for these participants will be taxable income in the year they are made rather than being taxed when the funds are taken out. As a result, retirees will be able to withdraw their Roth catch-up payments tax-free upon meeting certain requirements.

To Roth or Not to Roth

The decision to contribute to a Roth account can vary by individual depending in part on factors such as a person’s age, tax condition, alternative investment strategies, overall retirement goals and estate planning. 

If you’re approaching or are in excess of the $145,0001 compensation threshold and don’t plan to utilize Roth catch-up contributions, maximize pre-tax catch-up contributions while you still can! Starting in 2024, you will be subject to Roth only catch-up contributions when making above $145,0001, which may not be ideal for all participants at this earnings level.

2025: Super Savings with Super Catch-Up

Beginning in 2025, participants between the ages of 60-63 will be allowed to contribute the greater of $10,0002 or 150% more than the regular catch-up amount.

Let’s evaluate your plan to identify those who utilize catch-up contributions and discuss Roth opportunities to propel participants forward.

Plan Design & Document Implications

As a retirement plan document must allow for Roth and/or Catch-Up contributions, it will be critical to conduct a review of your plan heading into 2024. My Benefits, LLC stands ready to assist in your review to make any recommendations needed in accommodating these new mandates to meet your individual objectives. Should it be determined plan amendments are needed, our dedicated team will be eager to assist and “bring it all together for you”. 

1 Compensation threshold indexed for inflation starting in 2025

2 Contribution limit indexed for inflation starting in 2026

For informational purposes only. My Benefits, LLC and/or First Party Administrator, LLC does not provide legal and/or tax advice. Please consult with your tax advisor and/or financial advisor for more information regarding your individual strategies on the matters mentioned in this article.



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