You May Have to Put Catch-Up Contributions in a Roth 401(k): That's Not a Bad Idea

Putting catch-up contributions into a Roth 401(k) will be a requirement for high earners.

Pink piggy bank with $100 bills
(Image credit: Getty Images)

Thanks to the recent stock market rally, checking your 401(k) balance is no longer a cause for fear and trepidation. Fidelity Investments reported that the average 401(k) account balance in plans it manages rose nearly 8.3% in the second quarter of 2023 from a year earlier. Meanwhile, the number of 401(k) participants with $1 million or more in their accounts rose nearly 29% from a year earlier.

Whether you have $1 million or $100,000 in your account, there’s no question that contributing to a 401(k) or similar employer-provided plan is one of the most effective ways to ensure you’ll enjoy a comfortable retirement. But there’s a downside to traditional 401(k) plans, especially if you fall into the millionaire category: All of that money will be taxed when you take it out — possibly at a higher tax rate than you’re paying now.

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Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.