401(k) Catch-Up Contribution Changes Coming in 2026

Beginning in 2026, those 50+ earning over $145,000 will likely be required to make catch-up contributions to Roth accounts (paying taxes now instead of later).

This change stems from the SECURE 2.0 Act, aiming to increase government tax revenue.

If your 401(k) doesn't offer a Roth option, you might not be able to make catch-up contributions at all.

The IRS has issued final regulations to implement these changes, clarifying details such as wage aggregation for related employers and treatment of Puerto Rico retirement plans.

The Change:: Starting in 2026, if your prior-year wages from a single employer exceed $145,000 (indexed for inflation), any catch-up contributions must go into a Roth account.

Impact:: This eliminates the immediate tax deduction for catch-up contributions, as Roth contributions are made after-tax.

Considerations:

Check if your 401(k) plan offers a Roth option. If not, advocate for its inclusion.

Rebalance your retirement strategy, considering Roth conversions.

Explore alternative savings vehicles like cash balance plans for greater tax-deferred flexibility.

Aggregation of Wages:: The IRS final regulations allow employers to combine wages of related employers using a common paymaster to determine if the $145,000 threshold is met.

SIMPLE IRA Plans:: SECURE 2.0 increases contribution limits for SIMPLE plans sponsored by employers with 25 or fewer employees to 110% of the standard limits. The final regulations clarify how the super catch-up limit applies to those age 60-63.

Q: Who is affected by these changes?

Q: What if my plan doesn't offer a Roth option?

Q: When do these changes take effect?

High-income earners need to prepare for Roth catch-up contributions starting in 2026.

Ensure your 401(k) plan offers a Roth option.

Revisit your retirement strategy to optimize for these changes.

Stay informed about further regulatory updates from the IRS.