IRS 401k bombshell, now what?

[Anonymous]

So I’m I over 50 and have been doing makeup contributions but now that’s not going to happen anymore and I need to
Put that money in ROTH? Can someone explain this more?

[Anonymous]

Sounds like a revenue raiser to me. Make people pay tax at the highest rates of their peak earning years.

They should shut down Roths though. Terrible tax policy. But those are generally most beneficial for those who save in them when young, when their marginal rates are lower.

Few people have marginal rates higher in retirement than their peak earning years. I doubt this is beneficial to most.

[Anonymous]

Anonymous wrote:Sounds like a revenue raiser to me. Make people pay tax at the highest rates of their peak earning years.

They should shut down Roths though. Terrible tax policy. But those are generally most beneficial for those who save in them when young, when their marginal rates are lower.

Few people have marginal rates higher in retirement than their peak earning years. I doubt this is beneficial to most.

I agree. Roth is a great tool when young and in a low tax bracket, not so much when you are in peak earning years. Most of us could use a tax break now more than later, so a traditional IRA is a better option. That said, there's a good chance taxes will go up when we retire.

[Anonymous]

You can still do catchup contributions; they just have to be ROTH instead of pre-tax.

[Anonymous]

Just calm down everyone. This is not a big deal. The bulk of your contributions will remain pre-tax, just the catch-up portion will be after tax in ROTH. For each individual, it will be a neglectable increase in taxes, but for the country as a whole, this will results in more tax revenue coming in today (rather than down the road).

[Anonymous]

I thought everyone was aware of this change.

[Anonymous]

I’m fine with the change. I’m okay with paying tax now instead of later.

[Anonymous]

Your strategy should be to compare your alternatives with those funds: Roth 401k (possibly with restricted investments but no taxes on gains) vs taxable account (likely more investment options but cap gains tax)?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I thought everyone was aware of this change.

You are spectacularly unhelpful and borderline an a-hOL3

What help do you need? I thought you were just venting. This change was known ahole.

[Anonymous]

Invest in bitcoin.

[Anonymous]

It keeps getting delayed. They just announced that it will begin at the very end of 2026 rather than the beginning. So one more year to contribute everything to traditional.

[Anonymous]

It only really sucks for people over 60
People 50-60 are young enough a Roth makes sense for a lot of them.

[Anonymous]

If you are on the younger side of the catch up, a Roth IRA makes more sense than a Roth 401k

[Anonymous]

Anonymous wrote:It only really sucks for people over 60
People 50-60 are young enough a Roth makes sense for a lot of them.

Roth can make sense if you are over 60 - you don't have to take RMDs on any money you convert.

[Anonymous]

Anonymous wrote:

They should shut down Roths though. Terrible tax policy. But those are generally most beneficial for those who save in them when young, when their marginal rates are lower.

You can think of it as poor tax policy or you can think of it as an excellent incentive to save young, which was how I took it. I am not sorry I did that.

TBH I think the explanation of Roth benefits should be mandated before high school graduation.