Big Changes Ahead for 401(k) Catch‑Up Contributions
Starting in 2026, workers age 50 and older who earn more than $145,000 from their employer will face a new rule for catch‑up contributions. Instead of being able to put those extra dollars into a traditional pre‑tax 401(k), they’ll be required to direct them into a Roth 401(k). This adjustment, part of the SECURE 2.0 Act, shifts the tax treatment of those contributions and could reshape retirement planning for higher‑income earners.
What This Means for Savers
Catch‑up contributions are designed to help older employees boost their retirement savings as they near retirement. For 2025, the catch‑up limit is $7,500, and it will rise to $8,000 in 2026. Under the new rule, high earners won’t be able to use those contributions to lower taxable income today. Instead, they’ll pay taxes upfront, with the benefit of tax‑free withdrawals in retirement.
Why the Rule Was Introduced
Lawmakers designed this change to increase tax revenue in the short term while encouraging long‑term savings in Roth accounts. Roth contributions can be advantageous because they grow tax‑free and withdrawals in retirement aren’t taxed. However, for individuals accustomed to the immediate tax break of traditional 401(k) contributions, this shift may feel like a financial setback in the near term.
To put the new rule into perspective, here’s an example of how much someone age 50 or older can contribute to a traditional 401(k) versus a Roth 401(k) starting in 2026:
Maximum Contributions for Age 50+ (Starting 2026)
- Base 401(k) contribution limit: $24,500
- Catch‑up contribution limit (age 50+): $8,000
If earning $145,000 or less:
- Up to $24,500 in a traditional 401(k) (pre‑tax)
- Up to $8,000 catch‑up in either traditional 401(k) or Roth 401(k)
If earning more than $145,000:
- Up to $24,500 in a traditional 401(k) (pre‑tax)
- $8,000 catch‑up must go into a Roth 401(k) (after‑tax)
Planning Ahead
If you fall into the affected group, it’s important to review your employer’s retirement plan. Not all plans currently offer a Roth option, and employers will need to update systems before the rule takes effect. For individuals, this may mean adjusting cash flow to account for the upfront tax cost while still maximizing retirement savings. Consulting with a financial advisor can help you weigh the trade‑offs and plan accordingly.
The Bottom Line
This change highlights how retirement rules evolve and why staying informed matters. For higher‑income earners over 50, catch‑up contributions will soon look different—but they can still be a powerful tool for building tax‑free retirement income. Preparing now ensures you won’t be caught off guard when the Roth requirement arrives in 2026.
