Dear Readers,

"How does the SECURE 2.0 Act affect me, especially as a higher-income employee, and what should I be doing to prepare for these changes?" is a question that we recently received that is on the minds of many UPS employees.

Congress enacted the SECURE 2.0 Act in late 2022, which is a major change in retirement planning, especially for higher earners. The purpose of this legislation is to improve American workers' retirement savings alternatives. It will bring about various changes that will affect UPS employees, particularly those who are over 50.

Recognizing the Modifications

For UPS workers, 401(k) plans have long been a cornerstone of their retirement savings strategies since they provide tax benefits for pre-tax contributions. But beginning in 2026, the SECURE 2.0 Act requires high-earning employees—those making more than $145,000 a year—to make a significant change. Rather than contributing to regular 401(k) accounts, these workers will now have to make their "catch-up" payments to Roth accounts.

The instant tax deduction benefit of traditional 401(k) contributions will no longer apply to catch-up contributions due to the shift from pre-tax to after-tax contributions. Consequently, impacted workers may experience a rise in their immediate tax obligations and a fall in their after-tax income.

The Possible Drawbacks

The shift presents two primary obstacles for high-earning UPS personnel:

• Diminished Immediate Tax Benefits: By eliminating the upfront tax benefit, the transition may result in higher short-term tax obligations.
• Diminished Net Pay: Because Roth account contributions are paid using post-tax money, people who make catch-up contributions will see a decrease in their take-home pay.
• Observing the Positive

Though there are short-term difficulties, there are long-term advantages to take into account. For people who plan to retire in the same tax bracket or one that is higher, Roth accounts can be especially advantageous because they allow for tax-free growth and withdrawals. Furthermore, Roth accounts offer greater flexibility when it comes to withdrawals, which is a useful addition to financial planning.

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Planning for the Future

Employees and their financial advisors have a critical window of opportunity to modify retirement savings strategy due to the delay until 2026. This time frame is crucial for comprehending the new environment and for making defensible choices that take into account the tax effects and retirement objectives.

HR and Financial Advisors' Roles

The SECURE 2.0 Act's effects extend beyond personal savings plans. It emphasizes how crucial it is to make proactive financial plans and keep up with changing legal requirements. Employees who will be impacted by these developments will benefit greatly from the specialized guidance provided by HR departments and financial consultants in order to successfully negotiate this unfamiliar landscape.

The Reason It Is Important

It's critical for UPS employees who are getting close to retirement to comprehend and adjust to the SECURE 2.0 Act in order to ensure their financial security in retirement, particularly if their assets are less than the typical 401(k) amount. Though it provides obstacles in the form of diminished tax benefits and possible effects on net income, this act offers a chance for careful financial planning.

In Conclusion

Significant adjustments to retirement savings plans are made for high-earning UPS employees by the SECURE 2.0 Act. Even while there are immediate difficulties, there are also chances for tax-efficient preparation. Affected personnel must obtain professional guidance and modify their tactics in advance of the implementation date. Having a financially secure retirement depends on being proactive and knowledgeable.

We hope that this explanation clarifies the SECURE 2.0 Act and how it affects workers at UPS. Together, HR departments and financial advisors are here to help you manage these changes if you have any further questions or need assistance.