A significant change to retirement savings rules took effect on January 1, 2026, and many high-income workers may not realize how it affects their 401(k) contributions. Under the SECURE 2.0 Act, employees who earned more than $150,000 in the prior year must now make all catch-up contributions on a Roth (after-tax) basis.
Understanding the New Requirement
The SECURE 2.0 Act, passed in late 2022, included numerous provisions to strengthen retirement savings. One key provision now in effect mandates that high earners direct their catch-up contributions to Roth accounts rather than traditional pre-tax accounts.
Here's how it works: If you earned more than $150,000 in FICA wages from your employer in 2025, any catch-up contributions you make to your 401(k), 403(b), or governmental 457(b) plan in 2026 must be designated as Roth contributions.
The $150,000 threshold is based solely on wages from your current employer—compensation from other jobs or sources is not combined for this calculation.
Who Is Affected
This rule impacts workers aged 50 and older who participate in employer-sponsored retirement plans and exceeded the $150,000 wage threshold in the prior year. Those earning $150,000 or less can continue making catch-up contributions to either traditional pre-tax or Roth accounts based on their preference.
Importantly, this requirement only applies to employer-sponsored retirement plans. Traditional and Roth IRAs are not affected by this rule.
2026 Contribution Limits
For 2026, the IRS has set the following contribution limits:
- Standard 401(k) contribution limit: $24,500
- Catch-up contribution limit (age 50+): $8,000
- Enhanced catch-up limit (ages 60-63): $11,250
- IRA contribution limit: $7,500
- IRA catch-up contribution (age 50+): $1,100
Workers aged 50 and older can contribute up to $32,500 total to their 401(k) in 2026. Those aged 60 to 63 benefit from an even higher catch-up limit of $11,250, allowing total contributions of up to $35,750.
What If Your Plan Lacks a Roth Option?
Here's a critical consideration: If your employer's retirement plan does not offer a Roth contribution option, high earners may lose access to catch-up contributions entirely. The IRS requires plans to have a Roth feature for affected participants to make their mandatory Roth catch-up contributions.
If you're unsure whether your plan offers Roth contributions, contact your HR department or plan administrator promptly.
The Silver Lining
While paying taxes upfront on Roth contributions may seem disadvantageous, there are notable benefits. Roth accounts grow tax-free, and qualified withdrawals in retirement are completely tax-free. For those who expect to be in a similar or higher tax bracket during retirement, Roth contributions can provide significant long-term tax advantages.
Additionally, Roth 401(k) accounts are no longer subject to required minimum distributions (RMDs) during the account owner's lifetime, thanks to another SECURE 2.0 provision that took effect in 2024.
Action Steps for High Earners
- Review your 2025 W-2 to determine if you exceeded the $150,000 threshold
- Confirm your plan offers Roth contributions by checking with your HR department
- Update your contribution elections to designate catch-up amounts as Roth if required
- Consider the tax implications and consult a financial advisor about optimizing your overall retirement strategy
The IRS issued final regulations in September 2025, with formal compliance required starting in 2027. However, plans are expected to operate in "reasonable, good faith" compliance throughout 2026.
Sources: IRS, Charles Schwab, Kiplinger, AARP