Key Changes to Roth 401(k) Rules in 2024: What You Need to Know
The SECURE 2.0 Act has brought about significant changes to Roth 401(k) account rules that will impact retirement planning for many individuals. One key change is the elimination of required minimum distributions (RMDs) for designated Roth 401(k) accounts starting in 2024. This means that account holders no longer have to withdraw a certain amount annually once they reach a certain age, providing more flexibility and tax advantages for retirement savings.
Additionally, employers can now deposit matching contributions directly into employees’ Roth 401(k) accounts, allowing for tax-free growth and withdrawals. However, these employer contributions will be taxed as income in the year they are made, so it’s important for individuals to plan for potential tax implications.
Another important change is the eventual requirement for high earners to make catch-up contributions on a Roth basis starting in 2026. This rule, which was initially set to take effect this year, will require individuals to pay taxes on their retirement savings during years when they typically earn more.
Overall, these changes aim to encourage more people to save for retirement and provide greater flexibility and tax benefits for Roth 401(k) account holders. It’s recommended to review your retirement plans with a financial advisor or tax planner to maximize your benefits under these new rules.