Here’s a shocking reality: A seemingly small change in federal retirement rules could upend the financial plans of thousands of Long Islanders, especially those in their peak earning years. But here’s where it gets controversial—while this shift is framed as a way to simplify retirement savings, it could actually force higher earners to pay more in taxes sooner than expected. And this is the part most people miss: the rule disproportionately affects regions like Long Island, where the cost of living is sky-high and six-figure incomes are the norm, not the exception.
Starting in 2027, Americans aged 50 and older earning over $145,000 will be required to pay taxes upfront on their 401(k) catch-up contributions, which will now be designated as Roth contributions. To put this in perspective, in 2025, individuals could set aside up to $7,500 in catch-up contributions, according to the IRS. Some retirement plans might even adopt this rule as early as 2026. But why does this matter? Because Long Island’s median household income—$143,144 in Nassau County and $126,863 in Suffolk County—far exceeds the national median of $83,730. That means a larger share of Long Islanders will feel the pinch.
Here’s the upside: Roth contributions grow tax-free, and withdrawals in retirement are also tax-free. Sounds great, right? But here’s the catch: For those in their peak earning years, this change could inflate their taxable income, potentially disqualifying them from valuable deductions or credits. As Jason Gilbert, a financial adviser at RGA Investment Advisors LLC, puts it, “What works for a 55-year-old executive may not work for a 52-year-old educator. Roth contributions aren’t automatically better—they’re just different.”
And this is the part most people miss: The rule change could force Long Islanders to rethink their entire retirement strategy. For instance, a common approach for those in their 50s is to delay paying taxes on catch-up contributions until retirement, when their income—and tax bracket—is lower. Now, that strategy is out the window. Ryan Derousseau, a financial planner, advises, “If you’re in a higher tax bracket and want the tax benefit today, you’ll need to save even more in the next few years before this rule takes effect.”
But let’s not forget the bigger picture: Retirement on Long Island is already a tightrope walk. A recent ALICE study found that a family of four in Nassau County needs at least $109,452 annually just to survive, and that number jumps to $133,380 if childcare is involved. Meanwhile, the average New Yorker faces a retirement savings shortfall of nearly half a million dollars. With over half a million Long Islanders aged 65 and older—a 24% increase in the past decade—the stakes couldn’t be higher.
Here’s a thought-provoking question: Is this rule change a step toward simplifying retirement savings, or is it a stealth tax hike on middle- and upper-middle-class families? Let’s discuss in the comments. And while we’re at it, what other retirement planning options should high earners consider? Beyond 401(k)s, there are Health Savings Accounts, backdoor Roth IRAs, and taxable brokerage accounts—each with its own pros and cons. As Gilbert notes, “It’s crucial to revisit multiyear tax projections to determine whether accelerating pre-tax contributions through 2026 or starting a Roth now makes more sense.”
For those feeling overwhelmed, resources like AARP’s ‘Money Mindset’ series and free tax-filing assistance can help. But the bottom line is this: Retirement planning on Long Island was already a challenge. This rule change just made it a lot more complicated. What’s your take? Are you prepared for these changes, or do you feel like the system is stacking the odds against you?
