Are Catch-up 401(k) Contributions Pre-Taxed for People Over 50?


Quick Answer

Catch-up 401(k) contributions for people over 50 are treated the same was as other employee contributions to the plan; the money is not included in taxable income for the year, according to Zacks.com. However, if a catch-up contribution is made to a Roth 401(k) plan, it won't be pre-tax.

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Full Answer

Because Roth 401(k) plans provide after-tax savings, contributions are taxable income but qualified distributions are tax-free. A catch-up contribution cannot be made unless compensation from an employer equals or exceeds the contribution amount, according to Zacks.com. Additionally, some 401(k) plans do not allow for catch-up contributions. Impermissable excess contributions are penalized by the IRS by being included in taxable income the year made and being taxed a second time when a distribution is taken.

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