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A12 BUSINESS
Tuesday 11 July 2023

Liz Weston: Saving for retirement just

got more complicated

By LIZ WESTON of NerdWal-
let
The Secure Act 2.0 legisla-
tion that passed late last
year added new retire-
ment savings options but
also has a few potential
catches for unsuspect-
ing savers. Understanding
these possible pitfalls may
help you make better de-
cisions, or at least be pre-
pared for what’s to come.
In my last column, I covered
one set of these changes:
new exceptions to the 10%
federal penalty for tapping
retirement money early. For
this column, I’ll cover what
you need to know about
Secure 2.0’s changes to
catch-up contributions
and company matches for This undated file photo provided by NerdWallet shows Liz Weston,
a columnist for personal finance website NerdWallet.com.
workplace plans. Associated Press
A POTENTIALLY PROBLEM-
ATIC CATCH-UP PROVISION
Catch-up provisions have
long allowed older workers which can be a huge age people from making
to put more money into re- boon to many savers, says catch-up contributions,
tirement plans. In 2023, for Colleen Carcone, director says economist Olivia S.
example, people 50 and of wealth planning strate- Mitchell, executive direc-
older can contribute an gies at financial services tor of the Pension Research
additional $7,500 to 401(k) firm TIAA. Council, which researches
s and 403(b)s, on top of the Contributing to a Roth is retirement security issues.
standard $22,500 deferral often recommended for And there’s another issue:
limit for all employees in younger workers who ex- Not all workplace plans
those plans. pect to be in the same or have a Roth option. If an
Contributions that go into higher tax bracket in retire- employer doesn’t add a
a plan’s pre-tax option ment. Roth option, no one will
are deductible. But start- But many people’s tax be able to make catch-
ing next year, people who brackets drop once they up contributions, Collado
earn $145,000 or more will retire. Roth contributions says.
no longer get a tax de- can make less sense for ANOTHER PROBLEMATIC
duction for their catch-up older workers who may be PROVISION: LAST-MINUTE
contributions to workplace paying a higher tax rate CATCH-UPS
retirement plans. They’ll be on their contributions than Beginning in 2025, workers
required instead to con- they’d avoid on their with- ages 60 through 63 can
tribute the money to the drawals. make even larger catch-
plan’s Roth option. (People Many financial planners up contributions to work-
earning less than $145,000 still recommend putting at place retirement plans. The
may have the option, but least some money into a maximum will be whichev-
not the requirement, to put Roth so retirees can better er is more: $10,000 or 150%
catch-up contributions into control their tax bill in retire- of the standard catch-
the Roth.) ment, Carcone says. up contribution limit. The
Withdrawals from Roths However, losing the tax $10,000 will be adjusted
are tax-free in retirement, deduction could discour- annually for inflation. q

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