Important changes are coming to how you contribute to your 401(k). The SECURE Act 2.0, originally scheduled to be in effect starting in 2026, states that if you make $145,000 or more in wages from your employer the previous year, any catch-up contributions you make must be made on a Roth (after-tax) basis. As of publication, these expected 2026 changes have now been delayed until after 12/31/2026. However, the plan sponsor is required during 2026 to use a “reasonable, good faith interpretation” of the rule and therefore begin to put into place the systems in their plan to meet the Roth requirement.
This change could impact your retirement tax planning, as well as impact the taxation of your income in retirement. Here are some things to consider.
Under the 2025 rule, if you’re age 50 or older, you can contribute extra to your 401(k). In 2025 the Annual Limit for a participant’s contributions to their 401k is $23,500. The ‘extra’ that someone over 50 may contribute is $7,500 (this is called the “catch-up” provision). So, someone 50 or over can contribute up to $31,000 to their 401k in 2025. A special rule for those aged 60 to 63 allows your catch-up to be a maximum of $11,250 in 2025.
However, starting in 2026, if you earned $145,000 or more in FICA wages from your employer the previous year, you must make all catch-up contributions as Roth instead of pre-tax.
This has several implications:
• No more pre-tax catch-ups: You’ll pay taxes on catch-up contributions now, but withdrawals will be tax-free in retirement (if qualified).
• Your plan must offer Roth: If your employer’s plan doesn’t include a Roth option, you won’t be able to make catch-up contributions at all.
• Threshold is indexed: The $145,000 income threshold will adjust in future years for inflation in $5,000 increments
So, if you will earn $145,000 or more in 2025 AND are 50 or older in 2026, this may affect you. However, if you’re self-employed or don’t receive FICA wages (e.g., partners or sole proprietors), you can still choose pre-tax or Roth catch-ups.
Next steps to consider in 2026:
• Check if your employer offers Roth contributions: If not, they’ll need to amend the plan for you to keep making catch-ups in 2026.
• Review your tax planning strategy: Since Roth contributions are made with after-tax dollars, this change could affect your tax situation, especially if you’ve relied on pre-tax deferrals.
• Plan for higher contributions at age 60–63: If you're in this age range, you’ll be eligible for a larger catch-up limit, which must also be Roth if you’re a high earner.
In summary, the new Roth-only catch-up rule is a significant shift for high earners, and one that requires advance planning. If you’re 50 or older and earning $145,000 or more, now is the time to confirm your employer’s plan offers a Roth option, understand how this change impacts your tax strategy, and adjust your savings approach accordingly.
If you are a plan sponsor, consider adding a Roth option to your plan. Contact us if you have any questions, or if your current provider has not mentioned this to you.