Pay taxes now or later is often a consideration when people decide how to save for retirement, but Congress decided the only option for some older Americans should be now for certain retirement accounts.
Secure Act 2.0, passed last December, says any employee at least 50 years old whose wages exceeded $145,000 the prior calendar year and elects to make a so-called catch-up, or additional, contribution to their 401(k) must do so on a Roth basis, or with after-tax money. That means those employees wouldn’t be able to take a tax deduction for that contribution, which is up to an extra $7,500 for 2023. Instead, they’ll be able to withdraw tax-free during retirement.
However, the change, set to start in 2024, is running into a myriad of problems that could prevent it from happening on time. Issues range from legislative errors, to operational challenges, to questions about whether the government can tell workers how to save for retirement — obstacles that might make it impossible for the law to take effect at all.
Medora Lee | USA TODAY