Liz Weston: Saving for retirement just got more complicated

abcnews.go.com:

Secure 2.0 gave people several new options for workplace retirement accounts, but it forces higher-income savers to use their plans’ Roth option for catch-up contributions

The Secure Act 2.0 legislation that passed late last year added new retirement savings options but also has a few potential catches for unsuspecting savers. Understanding these possible pitfalls may help you make better decisions, or at least be prepared for what’s to come.

In my last column, I covered one set of these changes: new exceptions to the 10% federal penalty for tapping retirement money early. For this column, I’ll cover what you need to know about Secure 2.0’s changes to catch-up contributions and company matches for workplace plans.

A POTENTIALLY PROBLEMATIC CATCH-UP PROVISION

Catch-up provisions have long allowed older workers to put more money into retirement plans. In 2023, for example, people 50 and older can contribute an additional $7,500 to 401(k)s and 403(b)s, on top of the standard $22,500 deferral limit for all employees in those plans.

Contributions that go into a plan’s pre-tax option are deductible. But starting next year, people who earn $145,000 or more will no longer get a tax deduction for their catch-up contributions to workplace retirement plans. They’ll be required instead to contribute the money to the plan’s Roth option. (People earning less than $145,000 may have the option, but not the requirement, to put catch-up contributions into the Roth.)

Withdrawals from Roths are tax-free in retirement, which can be a huge boon to many savers, says Colleen Carcone, director of wealth planning strategies at financial services firm TIAA. Contributing to a Roth is often recommended for younger workers who expect to be in the