This 401(k) Change Could Impact How You Make Catch-Up Contributions

Starting next year, some older workers making catch-up contributions to retirement plans, like 401(k)s, may have to do so on a Roth basis.

Secure 2.0, a federal retirement law passed in 2022, states that workers earning more than $145,000 must make catch-up contributions with money that’s already been taxed. Other workers are still eligible to make pre-tax catch-up contributions.

While Secure 2.0 had stipulated that this change should go into effect in tax year 2024, the IRS postponed it for two years.

Now, many workers will see the change reflected in their retirement plans starting in 2026—although employers will have until tax year 2027 to fully comply with the regulations laid out by the IRS.

“Hopefully, in the end, people will enjoy tax-free earnings,” said Elizabeth Thomas Dold, a Principal at Groom Law Group. “Change is not easy for anyone, it’s hard for record-keepers and plan participants.”

Will This Change Help or Hurt Your Retirement Savings?

This new change won’t impact all retirement savers—only older workers who make catch-up contributions and who earned more than $145,000 in the previous year with their employer. This income threshold is indexed to inflation, so it may increase for the 2026 tax year.

This means that, for 2026, your income will be determined by your wages on your W-2 form for 2025, according to Dold.

As of 2025, employees aged 50 and over are eligible to make catch-up contributions worth up to $7,500 to a 401(k), for a total employee contribution limit of $31,000.

Additionally, those aged 60 to 63 qualify for an even higher catch-up contribution. In 2025, these employees can contribute a total of $11,250 in catch-up contributions, for a total employee contribution limit of $34,750.

Unlike traditional 401(k) contributions, Roth contributions require that people pay tax upfront, forgoing an immediate deduction from their income. However, once they reach age 59½, they can withdraw their earnings tax-free.

This could be beneficial for those who believe that they’ll be in a higher tax bracket in retirement or who want to stash money away for tax-free growth.

The new change is also beneficial for the federal government, as it enables them to collect taxes on upfront contributions rather than wait until people take withdrawals.

“This makes them [the government] a lot of money, and that [allows] them do other things that they could pay for,” Dold said.

However, Dold said that some higher-income workers may not be able to make catch-up contributions at all if their plan sponsor chooses not to offer the Roth feature.

“The IRS clarified in the proposed and final regulations that plan sponsors do not have to eliminate catch-up contributions if they don’t want to add a Roth feature—it is only those $145,000 [earners who] will not be eligible to make any catch-ups, but everyone else 50 or older can still make pre-tax catch-ups,” Dold said.

The Bottom Line

If you’re an older worker who plans to make catch-up contributions next year to help bolster your retirement nest egg, you could be in for a substantial change.

Those who earned more than $145,000 this year with their current employer may be required to make their catch-up contributions on a Roth basis, meaning they pay taxes on the upfront contributions in 2026.

However, you may be excluded from this change if your employer doesn’t offer a Roth feature or you earned less than the income threshold in 2025.