Americans are behind on their retirement savings — and now the IRS is making it harder for some people approaching retirement to catch up
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To encourage people to save for retirement, the IRS allows people age 50 and over to put an extra $7,500 into their 401(k) plans before hitting pre-tax limits (and an extra $11,250 for people between 60-63). But upcoming changes to the tax code will make that perk vanish for people who make more than $145,000 per year.
Starting next month, high-earners over 50 who are hoping to put more money into their retirement savings will have to do so after paying taxes via a Roth 401(k). That's going to mean they're paying higher tax rates than they would when they take retirement disbursements, when their income is typically lower, putting them in a lower tax bracket.
The move also presents a pair of other new threats for people over 50. Because the money will be included in their taxed income instead of going directly into a 401(k), it could push some people into a higher tax bracket today.
And some high earners won't be able to participate, given current income limits on Roth IRAs. (People who make above $150,000 as a single filer or $236,000 as a couple are ineligible to contribute to the savings vehicle.)
While some 401(k) plans don't currently offer a Roth option, financial service firms have been scrambling to add them in recent years and more are likely to after the new rules prevent some people from utilizing the pre-tax catch-up option.
While the new rules could mean short-term pain for some people looking to boost their savings, they could have longer-term advantages. Should the market continue to hit new highs in the coming years, gains on Roth investments will not be taxed, reducing the burden in the golden years.
Roughly six in 10 Americans have money invested in a retirement savings plan, according to a 2025 Gallup survey. Only half of those people, however, are comfortable with their current savings levels. And AARP reports one in five Americans over the age of 50 have no retirement savings.
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