A major change to retirement plan rules took effect on January 1, 2026, and it is reshaping how older, higher-earning workers save for retirement. Under a provision of the SECURE 2.0 Act, catch-up contributions made by certain high earners must now be designated as Roth (after-tax) rather than traditional pre-tax dollars. If you are age 50 or older and made more than $150,000 in FICA wages last year, this rule likely applies to you.
What the Rule Actually Requires
Starting in 2026, participants age 50 or older who earned more than $150,000 in FICA wages from their current employer in the prior year must make all catch-up contributions to their employer-sponsored plan as Roth contributions. The IRS raised the wage threshold from $145,000 to $150,000 when it released the 2026 limits in November 2025.
Importantly, the rule applies only to employer-sponsored plans such as 401(k), 403(b), and governmental 457(b) plans. IRAs are not affected. Workers who earned $150,000 or less in 2025 can continue splitting catch-up contributions between pre-tax and Roth as their plan allows.
2026 Contribution Limits at a Glance
- 401(k) elective deferral limit: $24,500 (up from $23,500 in 2025)
- Standard age 50+ catch-up: $8,000
- Enhanced catch-up for ages 60–63: $11,250
- IRA contribution limit: $7,500 (up from $7,000)
- IRA age 50+ catch-up: $1,100
Combining the base 401(k) limit with the standard catch-up brings the total to $32,500 for most workers age 50+. Those in the enhanced catch-up window (ages 60–63) can contribute up to $35,750.
Why This Matters for Your Tax Bill
Roth catch-ups do not reduce your current taxable income the way pre-tax contributions do. For someone in the 32% or 35% federal bracket, losing the deduction on an $8,000 or $11,250 catch-up can mean thousands of dollars in additional tax owed today. In exchange, those dollars grow tax-free and are not subject to income tax in retirement.
If your plan does not offer a Roth option, you may be unable to make catch-up contributions at all until the plan is amended. According to Fidelity, most large plan sponsors have already added Roth features, but smaller employers may still be catching up.
Practical Steps to Take Now
- Check your W-2 wages. The $150,000 test looks at prior-year FICA wages from your current employer, not adjusted gross income. Bonuses, commissions, and taxable fringe benefits count.
- Confirm your plan offers a Roth 401(k). If not, ask HR about the timeline for adding one.
- Review your withholding. Since Roth catch-ups increase taxable income compared to pre-tax contributions, you may need to adjust W-4 withholding to avoid a surprise tax bill.
- Rebalance across account types. Losing a pre-tax deduction on catch-ups makes traditional IRA contributions, HSAs, and taxable brokerage tax-loss harvesting more valuable for managing today's tax bill.
- Consider Roth conversions strategically. If you were already planning partial Roth conversions in low-income years, the forced Roth catch-up should factor into your multi-year tax projection.
The Diversification Angle
Because Roth balances grow tax-free and are exempt from required minimum distributions during the original owner's lifetime, they serve as flexible late-career assets. Some retirement planners use Roth dollars for larger discretionary purchases in retirement or as a legacy vehicle for heirs. Investors already looking to diversify beyond stocks and bonds — for example, through a portion allocated to precious metals or other alternative assets — often find Roth accounts a natural home for assets they intend to hold long term.
The Roth catch-up rule is not just a compliance change; it is an inflection point for tax planning. Workers approaching retirement should review both their contribution strategy and their overall asset location before year-end.
Sources: IRS 2026 contribution limits announcement, Fidelity Learning Center, Charles Schwab, Vanguard fiduciary regulatory report, Manulife John Hancock Retirement.