Beginning in 2026, an important change will affect certain employees age 50 and older who make catch-up contributions to their workplace retirement plans.
Under the SECURE 2.0 Act, higher-earning employees may be required to make their catch-up contributions to a Roth 401(k) rather than a traditional pre-tax 401(k).
For taxpayers affected by the change, this could have a noticeable impact on current-year tax planning.
Who Is Affected?
If you are age 50 or older and earned at least $150,000 in FICA wages from the employer sponsoring your retirement plan in the prior year, your 401(k) catch-up contributions generally must be made on a Roth basis.
For 2026, that means the rule is based on your 2025 wages from that employer.
Unlike traditional 401(k) contributions, Roth 401(k) contributions are made with after-tax dollars. This means you do not receive an immediate income tax deduction for the contribution.
The potential benefit comes later: qualified Roth withdrawals in retirement can generally be received tax-free.
Employees below the applicable income threshold may generally continue choosing between traditional pre-tax and Roth catch-up contributions, depending on what their employer’s plan allows.
2026 Contribution Limits
The regular employee contribution limit for 401(k) plans increases to $24,500 for 2026.
Employees age 50 and older may generally contribute an additional $8,000 as a catch-up contribution.
Certain employees ages 60 through 63 may be eligible for a higher catch-up contribution of $11,250 if their employer’s plan permits it.
Because the Roth catch-up requirement affects how these contributions are taxed, employees approaching retirement may want to review their contribution elections before the rule takes effect.
Why This Matters for Tax Planning
For higher earners who previously made traditional catch-up contributions, the change could increase taxable income because those catch-up dollars will no longer reduce current-year taxable wages.
That does not necessarily make Roth contributions less valuable. It simply changes when the tax benefit occurs.
Traditional retirement contributions may provide a tax benefit today, while Roth contributions can provide tax-free qualified withdrawals later. The best approach depends on factors such as current income, expected retirement income, tax rates, and other sources of retirement savings.
Other Tax-Advantaged Savings Options
Taxpayers affected by the new rule may also want to review other available tax-advantaged accounts.
For example, individuals covered by an HSA-eligible health plan may be able to contribute to a Health Savings Account. HSA contributions can provide valuable tax benefits, including deductible or pre-tax contributions and tax-free withdrawals for qualified medical expenses.
Some taxpayers may also consider traditional IRA contributions, Roth IRA contributions, or Roth conversions. However, income limitations and other tax rules can make these strategies more complicated, particularly for higher-income taxpayers.
Backdoor Roth IRA strategies may also be available in certain situations, but taxpayers with existing pre-tax IRA balances should be aware that the tax consequences can become more complex.
Planning Ahead for 2026
The new Roth catch-up rule is a good example of why retirement planning and tax planning should be considered together.
Employees who may be affected should review their 2025 wages, confirm whether their employer offers a Roth 401(k) option, and consider how the loss of the current-year deduction could affect their overall tax situation.
At David Miller CPA LLC, we help clients evaluate how changes in tax law may affect their retirement contributions, taxable income, and overall tax strategy.
If you have questions about how the new Roth 401(k) catch-up rules may affect you in 2026, please contact our office to discuss your individual tax situation.