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Is a Roth 40(k) better than a traditional 40(k)? If 50+ the IRS just made the decision a lot easier.
Is a Roth 401(k) better than a traditional 401(k)? It depends. But for higher earners over 50, the IRS just made that decision a lot easier. If you earned more than $150,000 last year and are taking advantage of catch-up contributions, the catch-up dollars are now REQUIRED to go into Roth. Not pre-tax. That means paying taxes on that money now. But here is the upside: The Roth option grows tax-free, comes out tax-free, and gives you a lot more flexibility when we are trying to manage your tax bracket, Medicare premiums and required minimum distributions in retirement. And for higher earners who can't make direct Roth contributions any other way, this is actually a real opportunity and creates more options to control how your money comes out and gets taxed in retirement. Two things to check right now: whether your plan even offers a Roth option, and whether your employer has updated the plan to reflect this rule. They have until January 1, 2027 to implement it, but check with HR now so you know where things stand before it affects your contributions. And if you are between 60 and 63, there is a new super catch-up window that lets you contribute even more. That is more money moving into tax-free territory right before retirement. Most people do not regret saving more. They regret where they saved it. Ready to look at your 401(k) setup before this affects your contributions? Link in bio. #Roth401k #401k #RetirementPlanning #TaxStrategy #CatchUpContributions #FinancialPlanning #CFP #HighIncomeEarners #WealthBuilding
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