401k Catch-Up Changes

​As of January 1, 2026, important changes took effect for 401(k) catch-up contributions under the SECURE 2.0 Act…

​These updates may impact how much certain individuals can contribute — and whether those contributions are deductible.
 
New Roth Catch-Up Requirement for Higher Earners
A major structural change begins in 2026:
• If an employee age 50 or older had prior-year FICA wages above approximately $145,000 (indexed for inflation), any catch-up contributions must be made as Roth (after-tax) contributions
• These catch-up contributions will no longer be eligible for a current-year tax deduction
• Employees below the wage threshold may continue choosing pre-tax or Roth catch-up contributions (if the plan permits)
• If a plan does not offer a Roth 401(k) option, affected higher-income participants may be unable to make catch-up contributions until the plan is amended
 
This rule applies to 401(k), 403(b), and governmental 457(b) plans.
 
What This Means for Retirement Planning
For higher earners, this change shifts the tax benefit from today to the future:
• Roth contributions are taxed now but may be withdrawn tax-free in retirement if requirements are met
• Roth accounts are not subject to required minimum distributions during the owner’s lifetime
• The loss of a current-year deduction may impact tax projections and withholding strategies
 
Taxpayers should evaluate how this change affects overall retirement planning, marginal tax brackets, and long-term tax diversification strategies.
 
Action Steps
• Review your 2026 deferral elections
• Confirm whether your employer’s plan offers Roth catch-up contributions
• Evaluate whether increased contributions fit within your broader tax and cash-flow plan
• Consult with your tax advisor to determine the optimal strategy
 
Early planning can help avoid surprises and ensure retirement contributions remain aligned with long-term goals.