Changes to a popular 401(K) tax deduction are set to hit millions of high-earning Americans from next year.
Workers over the aged of 50 are entitled to make catch-up contributions to their 401(K)s worth up to $7,500 this year. The annual cap on all contributions is $30,000.
But from 2024, those earning over $145,000 will no longer be able to put these catch-up payments into a traditional 401(K).
Instead, the money will be only funneled into a Roth IRA account, according to new rules passed through Congress in December.
The main difference between a Roth account and a 401(K) pot is that the former is taxed upfront – but can be withdrawn for free in retirement.
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