Starting in 2025, high earners over 50 with FICA wages over $145,000 will pay taxes upfront on catch-up retirement contributions.

Starting in 2025, high earners over 50 with FICA wages exceeding $145,000 will no longer get a tax break on catch-up contributions to retirement plans like 401(k)s, 403(b)s, and SEP IRAs. These contributions will be taxed upfront, treated like Roth contributions—paid after-tax, growing tax-free, and withdrawn tax-free in retirement if rules are met. This change applies only to catch-up amounts, not regular contributions, and does not affect those earning below the threshold. If a plan lacks a Roth option, affected workers may lose the ability to make catch-up contributions. The rule aims to boost long-term retirement savings flexibility while increasing current tax burdens for high earners.