If you’re a high-earning, older worker, the rules for making “catch-up” contributions to a 401(k) or similar job-based retirement plan have changed.
Starting this year, employees 50 and older earning more than $150,000 who make contributions beyond the standard allowed amount must deposit that extra money into a Roth 401(k). That means you won’t get an upfront tax break for the extra contributions and your take-home pay may be lower. Until now, those contributions could go into your 401(k) pretax and reduce your taxable income.
That could catch some people by surprise, tax experts say. “It is a major change for a lot of people,” said Miklos Ringbauer, a certified public accountant with offices in Southern California.
Here’s what to know.
What are catch-up contributions?
The idea behind the extra contributions is that people may be behind on saving and can “catch up” by setting aside more money as they near retirement age.
In 2026, those older employees can contribute as much as $8,000 over the standard $24,500 cap. That means they can put away a total of $32,500. (Workers in their early 60s can contribute even more; more on that below.)
Why are the rules changing?
The change, which took effect on Jan. 1, was enacted as part of the SECURE 2.0 tax law passed in 2022. The provision was scheduled to begin in 2024, but was delayed to give employers and retirement plan managers more time to prepare and update their programs.
With a traditional 401(k), contributions are deducted from your paycheck pretax, allowing you to keep more of your income now. You pay income tax on the money when you withdraw funds in retirement.
With a Roth 401(k), the money is contributed from after-tax income so you get no tax break now. The upside comes later. “You can let it grow and take it out tax-free” when you retire, said Pamela Ladd, senior manager of personal financial planning with the American Institute of Certified Public Accountants. In general, withdrawals are tax and penalty-free if you are at least 59½ and the funds have been in the account for at least five years, she said.
Who is affected by the change?
For 2026, employees 50 and older who earned more than $150,000 in 2025 must make their catch-up contributions to a Roth 401(k). (The law originally set the threshold at $145,000, but the amount is adjusted each year for inflation.)
To determine your status, tax experts say, check Box 3 on your W-2 tax statement for 2025. That’s the box that shows earnings subject to Social Security tax.
Other income — say, earnings from a side gig reported on a Form 1099, or partnership income reported on a Form K-1 — doesn’t count for purposes of determining the Roth catch-up threshold, tax experts say.
Do special catch-up limits apply to workers in their early 60s?
Yes. If you are age 60 to 63, your catch-up limit is higher. Your extra contribution can be up to $11,250 in 2026, meaning your total contribution can be as much as $35,750. At age 64, this enhanced or “super” catch-up option no longer applies and you revert to the usual catch-up amount.
Are other kinds of retirement accounts affected by the new rule?
Yes. In addition to 401(k) plans, other job-based plans affected include 403(b) plans, typically offered by nonprofit employers, and government 457(b) plans, according to the I.R.S.
The rules don’t apply to individual retirement accounts.
How might the change affect my tax bill?
Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, said in an email that Roth treatment of catch-up contributions might provide long-term tax advantages, like flexibility in the timing of withdrawals in retirement. Since 2024, there has been no requirement to start taking money out of a Roth 401(k) after a certain age, said Angela Capek, product area leader of defined contribution product platforms at Fidelity Investments.
But in the short term, Mr. O’Saben said, higher tax bills and reduced cash flow “may come as a surprise” to taxpayers who have relied on catch-up contributions as a late-career tax-cutting strategy.
Consider, he said, a 55-year-old employee in the 24 percent tax bracket who earns above the wage threshold and makes the maximum $8,000 catch-up contribution for 2026. Under the old rules, the contribution would have reduced the employee’s federal tax bill by about $1,900, Mr. O’Saben said. But under the new rules, the $8,000 is included in taxable income.
The impact may be even greater for workers making “super” catch-up contributions, he said. Say a 62-year-old employee in the same tax bracket, whose 2025 wages exceed the new threshold, makes the maximum contribution of $11,250 in 2026. Previously, the contribution could have been made on a pretax basis, lowering the person’s taxable income and reducing federal income tax by about $2,700.
Must I take extra steps to send catch-up contributions to a Roth?
That depends on your employer’s retirement plan and how it’s administered, said Ms. Capek at Fidelity. Some employers automatically shift contributions over the standard catch-up amount into the plan’s Roth component, while others may require workers to affirmatively agree before directing the funds to a Roth.
What if my employer doesn’t offer a Roth 401(k)?
If an employer’s retirement plan doesn’t have a Roth option, workers earning more than the threshold cannot make any catch-up contributions to their job-based plan, said Hattie Greenan, a spokeswoman for the Plan Sponsor Council of America, a nonprofit group representing employers. But many employers have added the Roth version in response to the new tax law, she said. About 96 percent of 401(k) plans offered Roth accounts in 2024, the organization’s data show, and that proportion is probably “very close to 100 percent” now she said.
What if I earned less than $150,000 last year?
You can make any catch-up contributions to a traditional 401(k) and receive pretax savings. You may make the contributions to the Roth option if you prefer, but it’s not required.
What if I changed employers?
If you are starting with a new employer in 2026, you generally aren’t subject to the new rule because you didn’t have W-2 income reported by that employer in 2025, said Ian Berger, an analyst with Ed Slott and Company, an I.R.A. advisory firm.
Can catch-up contributions make a difference long term?
According to the investment firm Vanguard, the extra savings can add up over time. The company’s website gives this example: Tom and Mike are both 50 years old. Tom saves $24,500 a year in his workplace plan. Mike saves $32,500 a year, including catch-up contributions.
By the time they retire at age 65, Mike will have $186,208 more in savings than Tom, assuming a 6 percent average annual return. That means Mike will have almost $7,500 a year more annual retirement income than Tom, assuming they each withdraw 4 percent of their savings each year.
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