From 24/7 Wall St. · Rich Duprey · · 1m 20s
IRS Offers $35,750 Retirement Boost with Tax Catch
Retirement savers can boost savings by $35,750 but face higher taxes if they exceed $150,000 in 2025 wages.
In brief
Retirement savers can boost savings by $35,750 but face higher taxes if they exceed $150,000 in 2025 wages. The IRS allows workers 60-63 to contribute up to $35,750 to retirement accounts in 2026, but those earning over $150,000 in 2025 Social Security and Medicare wages must pay more taxes upfront. Originally…
Retirement Savings Opportunity
Workers in their early 60s get a rare chance to supercharge retirement savings this year with a $35,750 contribution limit under the SECURE 2.0 Act.
Enhanced Contribution Limits
Eligible workers ages 60-63 can contribute up to $35,750 in 2026, including $24,500 standard and $11,250 catch-up contributions.
Tax Catch for Higher Earners
Workers earning over $150,000 in 2025 Social Security and Medicare wages must make catch-up contributions to Roth accounts instead of pretax 401(k) plans.
Tax Impact Calculation
A 62-year-old worker in the 24% tax bracket would pay $2,700 more in federal income taxes upfront for a $11,250 catch-up contribution.
Strategic Contribution Approach
Higher earners can contribute standard $24,500 pretax and $11,250 catch-up to Roth accounts without exceeding the wage threshold.
Long-Term Savings Benefit
Contributing an extra $3,250 annually for four years could accumulate $13,000 in additional principal before investment returns.
Key Takeaway
The IRS has opened a valuable retirement savings window but higher earners must understand the new tax rules before increasing contributions.
At a glance
The IRS allows workers 60-63 to contribute up to $35,750 to retirement accounts in 2026, but those earning over $150,000 in 2025 Social Security and Medicare wages must pay more taxes upfront.
