How the 2026 Roth Catch-Up Rule Will Change Retirement Saving for High Earners
For decades, older workers have relied on catch-up contributions to boost their retirement savings in the final stretch before leaving the workforce. But starting January 1, 2026, the IRS will implement a major change that could reshape retirement planning for high earners. Under the new rule, individuals aged 50 and older earning more than $145,000 will be required to make their catch-up contributions to Roth accounts, not traditional pre-tax accounts.
This change, part of the Secure 2.0 Act, has far-reaching implications for employees, employers, and retirement tax strategies alike.
New IRS Rule for High Earners
The IRS will introduce an income test for catch-up contributions in 401(k) and 403(b) plans. Here’s the breakdown:
- Workers under age 50 can contribute up to $23,500 annually to their 401(k).
- Workers aged 50 and older can contribute up to $30,000, including a $7,500 catch-up.
- But starting in 2026, if you earn more than $145,000, that $7,500 must go into a Roth account—using after-tax dollars.
This marks the first time employer-sponsored retirement plans will apply income limits similar to those found in Roth IRAs.
Roth Accounts and Income Limits Explained
Roth accounts work differently than traditional pre-tax accounts: contributions are made with after-tax dollars, and withdrawals in retirement are tax-free. Until now, Roth 401(k) and 403(b) accounts had no income limits, unlike Roth IRAs, which restrict contributions for high earners.
The new rule doesn’t stop high earners from contributing to Roth accounts but it changes where catch-up contributions must go.
So, if you earn above the $145,000 threshold in 2026, your catch-up contribution will be taxed upfront, but you’ll enjoy tax-free growth and withdrawals in retirement.
Catch-Up Contributions and the “Super Catch-Up” Rule
The standard catch-up limit for those aged 50+ will remain $7,500 in 2026. However, there’s a new opportunity for those approaching retirement:
- Workers aged 60 to 63 can make a “super catch-up” contribution of up to $11,250 (150% of the standard amount).
- The same income limit applies if you earn more than $145,000, that super catch-up must go into a Roth account.
This allows near-retirees to accelerate their savings, but it also means higher short-term taxable income for those used to pre-tax contributions.
Employer Requirements and Plan Adjustments
Employers will also feel the ripple effects of this rule. By 2026, every employer offering a 401(k) or 403(b) must also offer a Roth option if they want employees to make catch-up contributions.
If a company doesn’t have a Roth feature by then, its high-earning employees will lose the ability to make catch-up contributions entirely.
Employees should check with HR or plan administrators now to confirm whether their employer’s plan supports Roth contributions. For those with multiple jobs, the $145,000 income limit applies per employer, meaning you could still make pre-tax catch-ups at one job if your earnings there are below the threshold.
Tax Implications for High Earners
This shift has immediate tax implications:
- Roth contributions do not reduce taxable income in the year they’re made.
- High earners could see an increase in taxable income, particularly those contributing the full $7,500 catch-up amount.
For instance, a 55-year-old earning $200,000 would have to make their $7,500 catch-up on an after-tax basis, potentially increasing their taxable income by the same amount.
While that may sting in the short term, the long-term benefit is substantial tax-free withdrawals in retirement and no required minimum distributions (RMDs) from Roth accounts.
Example Scenarios
Let’s look at two examples to see how this plays out:
Scenario 1:
A 55-year-old earns $200,000 and contributes the full $7,500 catch-up to a Roth 401(k).
- Taxable income increases by $7,500 in the current year.
- But all future withdrawals are tax-free, assuming the account meets Roth requirements.
Scenario 2:
A 60-year-old earning $150,000 contributes $11,250 in super catch-up contributions to a traditional 401(k).
- They remain under the income threshold, so their contribution remains pre-tax.
- This reduces their current taxable income and allows for tax-deferred growth.
The takeaway? The income threshold changes the contribution strategy dramatically depending on your earnings.
Additional Roth Flexibility Under Secure 2.0
Secure 2.0 also introduced new options for Roth employer matching contributions:
- Employers can now deposit matching contributions directly into Roth accounts.
- These contributions must be immediately vested and are taxable in the year they’re made.
This gives employees greater control and tax diversification in their retirement savings but requires thoughtful planning to manage the upfront tax hit.
Preparing for the 2026 Rule Change
If you’re over 50 and earning more than $145,000, here’s how to prepare:
- Confirm your employer offers a Roth option if not, ask HR about adding one before 2026.
- Revisit your tax strategy with a financial planner to anticipate higher taxable income.
- Consider Roth conversions ahead of the rule change to take advantage of current lower tax rates.
- Use the next year to balance contributions between pre-tax and after-tax accounts for maximum flexibility.
Bottom Line:
The 2026 Roth catch-up rule represents a significant shift for high-income earners nearing retirement. While it may reduce short-term tax deductions, it could provide long-term advantages through tax-free growth and withdrawals. The key is to plan now before the rule takes effect to ensure your employer’s plan and your personal strategy are both ready for the new era of retirement savings.
All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.
