By now you’ve probably heard plenty regarding the new SECURE Act 2.0’s changes to retirement saving, but if you’re a high-wage earner, there’s a specific provision that you need to be aware of. Get the details in this Instablog video from Russell Riveria.
Topics Discussed:
SECURE Act 2.0
Catch-Up Contributions for High-Wage Earners
You can watch this video and others on the Voice Wealth Management YouTube channel.
Transcript
Hi, I'm Russell Rivera, founder, and president of Voice Wealth Management. And welcome back to our instant blog series. So in our last video, we talked about how the secure act 2.0, which was part of the federal omnibus spending plan in December 2022, would impact required minimum distribution provisions. And newly gave people the ability to take excess 529 money and move it into a Roth IRA directly for their kids, subject to many provisions. Today, I wanted to talk about a different provision of secure act 2.0. That would impact many high-wage earners, particularly that regards catch-up contributions, not ketchup like Heinz or anything or hunts or anything like that, but catching up to increase retirement savings. Currently, those who put money in their 401 K account at work, who are under age 50, can put less money in than those who are over age 50. The additional contributions made by those over age 50 above that lower amount are called catch-up contributions. So in the past, those contributions for those workers were fully tax deductible, just like their regular 401 K contributions would be. But now, as systems put these possibility, you know, their systems into effect as providers put systems into effect, these contributions will now need to be made into a Roth account. So what does that mean? Whereas people would be able to put in a higher statutory maximum into a Roth IRA or into a 401 K account, if they're over age 50. Now, some of that must money must be post-tax, if they earn over a certain amount of money in wages. So this doesn't affect people who are self-employed, for example. But that being the case, there is ample opportunity, the opportunity is now, when these people retire, you'll have the opportunity to have a tax-free bucket to pull money from. That's not a bad thing. The bad thing is you'll have to pay taxes now on money that before you wouldn't have had to pay tax on. So it's a little bit of a trade-off as many things are. But as these things become more clear over the coming weeks and months, the planning opportunities abound. So with that, we'll share more next time. I'm Russell Rivera, founder and president of Voice Wealth Management. We'll see you next time.
Russell D. Rivera, CFA, CFP® is the Founder and President of Voice Wealth Management (Voice) in New York, NY. He also likes to think of himself as a Personal CFO and Financial “Therapist” for entrepreneurs, young professionals, and their families. He helps clients make prudent financial decisions regarding spending, saving, investing, and planning while giving a voice to the individual client's financial priorities and experiences.