SECURE Act 2.0 changes coming in 2024 and beyond
Will the new legislation affect you?
In this article:
- Workers making student loan payments in 2024 may get an offsetting contribution from their employer
- Leftover 529 balances can be used to contribute to the beneficiary’s retirement
- Qualified Charitable Distribution amounts and IRA catch-up amounts will be indexed for inflation
- Starting in 2026, catch-up 401(k) contributions must be made into a Roth account for high earners over 50 – this is a delay from the original legislation
- This could potentially increase your taxable income amount
Changes to catch-up contributions
Starting in 2026, there is an “income look-back” provision for 401(k) catch-up contributions. If you are over age 50, you can contribute an additional “catch-up” amount into your 401(k) plan. However, if you earn more than $145,000 in the prior year (indexed for inflation each year), your catch-up contributions must now go into the Roth component of your company plan.
This change was scheduled to take effect in 2024, however, the IRS recently extended the implementation window to 2026 to give 401(k) providers more time to administer these changes.
When it does take effect, because these are Roth contributions (after-tax), these catch-up contributions will no longer be tax deductible from your current year's annual income.
Therefore, this new rule could mean you pay more in income taxes, so it’s worth talking to your tax professional and financial planner in advance of the implementation to discuss strategies.
There will also be a change for those 50 and older to the IRA catch-up contribution, which is currently $1,000. Starting in 2024, the catch-up limit will be indexed for inflation, meaning it could increase every year, depending on the federal cost-of-living adjustment. Qualified Charitable Donation amounts will also be indexed for inflation.
Be sure to talk to your tax professional and financial planner about how these changes will impact your unique situation, needs and goals.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from your qualified tax and/or legal professionals to help determine the best options for your particular circumstances.