New Roth Catch-Up Rule Hits High Earners In 2026

Older workers nearing retirement have long enjoyed a valuable benefit: the ability to make additional, tax-deferred contributions to their workplace retirement plans. But under a new federal rule taking effect in 2026, that benefit is changing for many.

Beginning January 1, 2026, employees age 50 or older who earn more than $145,000 in the prior year will no longer be able to make pre-tax catch-up contributions to 401(k), 403(b), or 457(b) plans. Instead, these contributions must go into a Roth account, meaning they’ll be taxed upfront but grow and withdraw tax-free later.

The change stems from the SECURE 2.0 Act, which included dozens of provisions designed to expand retirement savings and modernize plan administration. The Roth catch-up rule was one of the most debated, prompting the IRS to delay its start date from 2024 to 2026 to give employers time to update payroll systems and plan documents.

In fact, just this month we’ve seen solo 401k plan providers update their plans to provide more options as well!

How The New Rule Works

Under current law, all employees can contribute up to $23,500 to their 401(k) in 2025. Those age 50 or older can add another $7,500 in “catch-up” contributions or up to $11,250 between ages 60 and 63 under the new “super catch-up” allowance.

Traditionally, workers could decide whether those dollars went into a traditional (pre-tax) or Roth (after-tax) account. That flexibility disappears for higher earners under the new rule.

Starting in 2026:

• If you earned $145,000 or less in the previous year, you can still make your catch-up contributions pre-tax.
• If you earned more than $145,000, your catch-up contributions must go to a Roth account, and you’ll owe income taxes on that money upfront.
• The $145,000 threshold will adjust each year for inflation.
• Employers who want to continue offering catch-up contributions must offer a Roth 401(k) option by 2026, or affected employees will lose access to catch-ups entirely.

The IRS finalized regulations in September 2025, confirming that employers have until the start of 2026 to comply. Some government or collectively bargained plans may have slightly longer.

Who Will Be Affected

Only a small share of savers are likely to see a direct impact. According to Fidelity Investments’ Retirement Savings Trends Report, just 8.6% of participants maxed out their contributions last year — a prerequisite for making catch-up contributions.

Those most affected include:

• High-income professionals in their 50s and 60s who consistently max out 401(k) contributions.
• Executives, managers, and specialized workers earning over $145,000 annually.
• Employees whose plans do not currently offer Roth contributions.

If you have multiple employers, the $145,000 threshold applies per employer, based on wages subject to Social Security and Medicare (FICA) taxes.

Tax Trade-Offs: Paying Now Or Paying Later

The most immediate effect is higher taxes in the year you contribute. Because catch-up contributions will be Roth-only, high earners will lose the immediate deduction they’ve historically received.

For example, someone in the 32% federal tax bracket who contributes $7,500 in catch-ups will owe about $2,400 more in federal income tax that year. But those contributions will then grow tax-free, and withdrawals in retirement will also be tax-free.

This shift means paying taxes at your peak earning rate rather than a potentially lower rate in retirement. But it also offers benefits: Roth savings are not subject to required minimum distributions (RMDs), and withdrawals don’t increase your taxable income later, which can help reduce taxes on Social Security and Medicare premiums.

How To Prepare

If you think you may be impacted, here’s what to do:

1. Confirm Your Plan Offers a Roth Option

If your employer’s plan doesn’t yet include a Roth 401(k), they’ll need to add one by 2026. Otherwise, you may lose access to catch-up contributions altogether. Contact your HR department or plan administrator to confirm. It’s currently benefits enrollment season, so you may know sooner anyway.

2. Review Your Income and Payroll Records

The $145,000 limit is based on prior-year wages from that employer. If you expect to cross the threshold, your payroll system will automatically redirect your catch-up dollars into a Roth account.

3. Revisit Your Tax Strategy

Because the Roth treatment changes your tax timing, you may want to adjust:

• Withholding or estimated tax payments for 2026
• The mix of pre-tax and Roth contributions in your plan
• How much you set aside for catch-ups versus taxable investments

4. Consider Asset Placement

Since Roth accounts grow tax-free, financial planners often recommend putting higher-growth assets (such as equities) there, while placing more conservative holdings in traditional pre-tax accounts.

5. Model Long-Term Tax Scenarios

While you’ll pay more in taxes now, the trade-off may be worth it if you expect tax rates to rise or anticipate needing tax-free withdrawals later. Check out tools like Boldin or ProjectionLab to see what impact this could make on your retirement plans.

The Bottom Line

For workers earning below the $145,000 threshold, nothing changes: you’ll still have the choice between pre-tax and Roth catch-ups. But if you’re close to that income level, a bonus or raise could unexpectedly trigger the new requirement.

The new Roth catch-up rule represents one of the most significant shifts in workplace retirement saving in years. While it removes a valuable tax deferral for high earners, it also accelerates a broader trend toward Roth-style, after-tax retirement saving.

If you’re a high-income worker over 50, 2025 may be your last year to make tax-deferred catch-up contributions. 

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