New IRS Start Date for Mandatory Roth Catch-Up Contributions

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist. As always, consult a tax or financial professional to determine how these and other tax changes might impact your retirement savings strategy. In addition, the IRS confirmed the “super catch-up” provision under the SECURE 2.0 Act, effective beginning with the current 2025 tax year. Under SECURE 2.0, if you're at least age 50 and earned $145,000 or more in the previous year, you can make catch-up contributions to your employer-sponsored 401(k) account.

We can refer to the AP Stylebook when we want to learn more about hyphen rules. According to AP Style, hyphens link multiple words together when they are used to modify the same noun. The IRS recently indicated that the rules will apply to most plans beginning in the 2027 tax year.

• The additional income will increase your federal, state, and local taxes, so all three rates should be considered as you plan to pay more.
• If the stock market or the value of your portfolio soars, tax rates may not bother you at all in the end, Conners said.
• If you fall into this category, take the time between now and the end of next year to understand how the new rules will affect you.
• The first is with the hyphen, in which case catch-up is an adjective modifying a noun, or it is a noun.

Currently, you have the flexibility to decide if you want contributions to go to a traditional or Roth 401(k). If your employer offers a Roth 401(k), you can split your contributions in any proportion between the two types of plans. If you’re an employee age 50 and older, you can continue making catch-up contributions to your retirement accounts for now. However, once the rules are fully implemented (or sooner in some cases), high earners will need to make Roth-only catch-up contributions. However, some might note that the catch-up rule technically applies as of January 1, 2026. But the 2027 date essentially gives employers and plans a grace period (of sorts) as they work in good faith to ensure their plans fully comply with the new rules.

Investments inside Roth accounts grow tax-free, so it is often beneficial to put more growth-oriented investments like stocks inside a Roth. A slightly different meaning of the noun catch-up is when you say you are playing catch-up. For example, you say this when you are behind in some competition or game involving a score. However, the noun stands alone and does not describe another noun. "In retirement, you have go-go, slow-go, and no-go years," said John Jones, investment advisor representative at Heritage Financial.

Catch Up On New 401(k) Rules

The SECURE Act was passed in 2019, and was followed by a second bill, generally referred to as SECURE 2.0, in 2022. A provision of SECURE 2.0 stated that high-income earners would no longer be allowed to make catch-up contributions to their 401(k) on a tax-deferred basis. It has been nearly three years since the bill passed, but just this month, the IRS finally provided clarity on when and how these new rules would be implemented. Read on to see if you will face changes to 401(k) contributions and how to navigate them. Initially, that change was slated to start with contributions made in 2024. But the IRS has finalized regulations giving employers and taxpayers some flexibility to adjust.

Merriam-Webster’s Great Big List of Words You Love to Hate

For those between ages 60 and 63 at the end of the year, there is a ‘super catch-up’ limit that caps out at $11,250. These higher limits allow you to contribute a max of between $31,000 and $34,750 to your 401(k) each year, depending on your age. Furthermore, the rules of AP Style and the Chicago Manual of Style state that you should use a hyphen with the term catch-up when it is an adjective or noun. In The Cambridge Dictionary and The Oxford Dictionary, “catch up” is defined clearly by both as a phrasal verb. They both mention that it comes from the root “to catch” and that the two-word variation is appropriate in this way.

New 401(k) catch-up rule may hit older high earners in 2026

Through examples, we’ll delve into correct and incorrect usage, emphasizing spelling and punctuation. Your contributions are invested, and when you ultimately take money out of your 401(k), you pay tax on every dollar distributed. In other words, you get a deduction now, your money grows tax-deferred, and you pay taxes later when you take money out.

• If your top federal tax rate is 24% and your state’s tax rate is 4%, every dollar contributed to your 401(k) would save you $.28.
• This is often ideal if you are a younger worker or aren’t in a high tax bracket during your career.
• For example, you say this when you are behind in some competition or game involving a score.

What are catch-up contributions and the new rules?

It’s the first mandatory Roth provision ever added to the tax code. While it is appropriate to write it as two words or as a hyphen form, the one-word variation does not work in any case. We need to make sure there is a key difference between “catch” and “up” when writing them. According to Google Ngram Viewer, “catch up” is the most popular choice of the three. This shows that you are more likely to come across the phrasal verb in English than any other variation.

If you fall into this category, take the time between now and the end of next year to understand how the new rules will affect you. The IRS final rules also clarify other questions, like how employers determine if an employee’s income exceeds the $145,000 threshold. If employers offer a Roth and traditional 401(k) in 2026, only employees who earned less than $145,000 the prior year at their current company can choose where to put their money. Those above the wage threshold must contribute their catch-up contributions to the Roth 401(k).

Is “Catch up” Two Words?

Employers can voluntarily implement the changes early, and some government or collective bargaining plans may have later start dates for the new rules. The word catchup as one word without a hyphen is agency problem incorrect, and you should not use it. You do not need to capitalize either part of the hyphenated form due to this. Adhering to these guidelines ensures linguistic accuracy and effective expression, fostering seamless communication across various contexts. Consistency in usage between UK and US English will be discussed, and a summary will clarify when each form is appropriately employed.

This can be quite powerful if you are in a high tax bracket during your working years. For example, if you are in the 24% bracket, an extra $7,500 of income will cost $1,800 in tax, while someone in the 37% bracket will pay an extra $2,775. The additional income will increase your federal, state, and local taxes, so all three rates should be considered as you plan to pay more. Using different word forms and phrasal verbs correctly is challenging, so it is vital that you get it right.

“Catch up” is correct as two words when we use it to demonstrate an action. In this way, it is known as a phrasal verb, which shows that someone is trying to “catch up” with another person or thing. Understanding the nuances of Catch Up, Catch-Up, or Catchup is essential for clear communication. Employ Catch-Up with a hyphen when serving as an adjective or noun. ” If the answer is yes, as it is for many high-income earners, then the immediate deduction gained by contributing to a traditional 401(k) is often beneficial.

Conversely, contributions to a Roth 401(k) don’t reduce your taxable income annually. Instead of a tax break up front, Roth investors get their tax break when they take money out of the plan as qualified distributions from Roths are tax-free. You get no tax deduction now, your money grows tax-free, and you pay no tax later when you take money out. This is often ideal if you are a younger worker or aren’t in a high tax bracket during your career.

This article embarks on a journey to explore the various forms of this term as a noun, adjective, and verb. In 2025, the annual limit for 401(k) contributions is $23,500 for anyone under the age of 50. If you are over 50, the limits are higher, allowing you to make additional contributions, called catch-up contributions. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more.