Congress Ended a Tax Break That May Help Higher Earners

Many retirement savers are furious about a law set to take effect in January, and at first glance it’s easy to see why.

  • The provision, enacted in late 2022, denies a key tax deduction to workers aged 50 and older who had $145,000 or more in wages the prior year.
  • They’ll no longer be able to put “catch-up” contributions into traditional 401(k) or similar plans, which allow upfront deductions on dollars going in but impose income taxes on future withdrawals.
  • Instead, these savers can only put catch-ups into Roth 401(k) accounts—so they won’t be tax deductible, although future withdrawals can be tax-free.

Click here to see why you shouldn’t necessarily be mad if you’re affected.