Starting January 1, 2026, a significant change is coming for retirement savers aged 50 and older. Under the Secure 2.0 Act, individuals who earned more than $145,000 from their employer in the prior year will face new requirements for their 401(k) catch-up contributions. Consult with your advisor or accountant to see if you will be impacted by this change. In the meantime, here’s what you need to know to stay prepared.

What’s Changing?

Currently, catch-up contributions allow those aged 50 and above to contribute extra funds to their 401(k) plans on a pre-tax basis, reducing taxable income today. However, beginning in 2026, this will change for high earners.

  • Who is affected?
    Employees aged 50+ with prior-year wages exceeding $145,000.
  • New rule:
    Catch-up contributions must be made as Roth contributions—meaning after-tax dollars—instead of pre-tax.
  • Impact:
    You’ll lose the immediate tax deduction on these extra contributions, but your money will grow tax-free and can be withdrawn tax-free in retirement, provided certain conditions are met.

Why Does This Matter?

If your employer’s plan does not offer a Roth option, you will not be able to make catch-up contributions at all. This makes it critical for both employees and employers to review plan features before the rule takes effect. If your plan allows the Roth option (most do), you may continue to take advantage of catch-up rules, however it will only be on an after-tax basis. For 2026, the new limits are as follows:

  • Eligible employees: $24,500 contribution limit in 2026 (increased from $23,500)
  • Age 50 and over: The standard catch-up contribution is $8,000 in 2026.
  • Ages 60–63: A special “super” catch-up limit of $11,250 is available, provided the plan allows for it.
  • Combined limit: The total contribution for those 50 and over is the standard limit plus the catch-up contribution. For example, the maximum total contribution would be $24,500 (standard) + $8,000 (catch-up) = $32,500.

Key Takeaways for High Earners

  1. Evaluate Your Tax Situation
    Check to see if you will be impacted by this new rule. Then, consider whether paying taxes now on Roth contributions is better than paying taxes on withdrawals later.
  2. Check Your Plan’s Offerings
    Confirm your employer’s 401(k) plan includes a Roth option. Without it, catch-up contributions won’t be possible if you make over $145,000.
  3. Plan Your Long-Term Tax Strategy
    Think about your expected tax bracket in retirement. Roth contributions may be advantageous if you anticipate higher taxes later.

Bottom Line

The Secure 2.0 Act’s new rules shift the landscape for retirement planning. It is important to work with your advisor on an on-going basis to see how changes in the industry may impact your financial plan. Earners impacted should act now. Review your plan, understand the tax implications, and adjust your strategy to make the most of this change.

References

Joshua VanderGraaff
Employer Retirement Plan Advisor

Disclosures:

This is provided for informational purposes only and should not be interpreted in any way as investment, tax, accounting, legal or regulatory advice. An investor must take into consideration his/her individual circumstances. 

There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit.  All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their wealth advisor prior to making any investment decision.