What about high earners that hit the cap on being eligible to even have a Roth IRA? You’re forced to make catch up contributions that you’re not eligible to make because of income limits?
Roth IRA have those special income limits the determine whether or not you are eligible to make a contribution. Roth 401K does not, you can make $1M in W2 and still be eligible to make a Roth 401K EE deferral. (Comment is for education. Not advice)
Q1 High earners ineligible for direct contribution to Roth IRA may contribute indirectly via *_back door_* Roth IRA process. Q2 You seem to be conflating Roth 401(k) with Roth IRA.
@@alrocky no the implication was that you could use a Roth 401k this way and not a Roth IRA. Why did they force high earners into any Roth type that they aren’t allowed to use because of income limits? Seems like a really stupid move by the government.
@@brianv7350 Your complaint in your OP was regarding Roth IRA. Catch up as Roth 401(k) for high earners has nothing to do with Roth IRA contributions or Roth IRA catch up contributions. If you balk and decide not to contribute $7,500 to Roth 401(k) catch up because of the tax implication, you will still pay that same tax on $7,500.
My guess is the responsibility for monitoring this new Roth Catch Up is going to fall more heavily on the employer instead of the recordkeeper. Hopefully, the payroll companies will be able to integrate this new restriction into their payroll system so if an employee with over $145K in comp in the previous year tries to make a pre-tax catch-up contribution, the payroll system would reject that pre-tax deduction kind of like the systems do with the 401K EE deferral limits now. (Comment is for education. Not advice)
I am about to turn 50. Making catch up, but so disappointed that after that I can’t take pretax catch up in 2024 because I make slightly too much. My taxes keep going up while rich get breaks. So typical.
With the contribution being part pre tax and part post tax, people will probably end up paying double tax. Who’s going to track how it was divided up over the years?
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To me, 145k is not high earner, especially if in high cost of living areas. Just another way to grab taxes sooner at higher tax bracket folks
What about high earners that hit the cap on being eligible to even have a Roth IRA? You’re forced to make catch up contributions that you’re not eligible to make because of income limits?
Roth IRA have those special income limits the determine whether or not you are eligible to make a contribution. Roth 401K does not, you can make $1M in W2 and still be eligible to make a Roth 401K EE deferral. (Comment is for education. Not advice)
Q1 High earners ineligible for direct contribution to Roth IRA may contribute indirectly via *_back door_* Roth IRA process.
Q2 You seem to be conflating Roth 401(k) with Roth IRA.
@@alrocky no the implication was that you could use a Roth 401k this way and not a Roth IRA. Why did they force high earners into any Roth type that they aren’t allowed to use because of income limits? Seems like a really stupid move by the government.
@@brianv7350 Your complaint in your OP was regarding Roth IRA. Catch up as Roth 401(k) for high earners has nothing to do with Roth IRA contributions or Roth IRA catch up contributions.
If you balk and decide not to contribute $7,500 to Roth 401(k) catch up because of the tax implication, you will still pay that same tax on $7,500.
Does this new (forced) ROTH 401k catchup contributions also counts against your normal external annual ROTH IRA contribution limits?
No, the Roth 401k and Roth IRA limits are independent of each other (Comment is for education. Not advice)
How are record keepers going to adjust for this
My guess is the responsibility for monitoring this new Roth Catch Up is going to fall more heavily on the employer instead of the recordkeeper. Hopefully, the payroll companies will be able to integrate this new restriction into their payroll system so if an employee with over $145K in comp in the previous year tries to make a pre-tax catch-up contribution, the payroll system would reject that pre-tax deduction kind of like the systems do with the 401K EE deferral limits now. (Comment is for education. Not advice)
I am about to turn 50. Making catch up, but so disappointed that after that I can’t take pretax catch up in 2024 because I make slightly too much. My taxes keep going up while rich get breaks. So typical.
With the contribution being part pre tax and part post tax, people will probably end up paying double tax. Who’s going to track how it was divided up over the years?