Since January 1, 2026, important changes to 401(k) catch-up contributions have taken effect under the SECURE 2.0 Act and new IRS regulations, impacting how older workers save for retirement. Catch-up contributions allow individuals age 50 and older to contribute more than the standard annual limit to their retirement plans. These rules were created to help people who may be behind on retirement savings build a stronger financial future as they approach retirement. While the opportunity to save more remains, the way those contributions are treated for tax purposes will change for certain workers.
Under the new law, employees who earned more than a set wage threshold in the prior year will be required to make their catch-up contributions as Roth contributions rather than traditional pretax contributions. This means those catch-up amounts will be taxed in the year they are contributed instead of being deferred until retirement. The income threshold is based on prior year wages reported for Social Security and is $150,000 (in FICA earnings) for the 2026 plan year, though it will be adjusted over time for inflation. For individuals below that income level, catch-up contributions may still be made on a pretax basis if the employer’s plan allows it.
Another significant update is the higher catch-up contribution limits for certain age groups. Workers between the ages of 60 and 63 will be allowed to contribute an even larger catch-up amount ($11,250) than those ages 50 to 59 ($8,000). This provision is designed to give people nearing retirement a final opportunity to increase their savings during peak earning years. These expanded limits, combined with the new Roth requirement for higher earners, make it more important than ever for individuals to understand how their contributions will affect their current taxes and future retirement income.
These changes matter because they can directly impact cash flow, tax planning, and long term retirement strategies. Some workers may welcome the Roth treatment because qualified withdrawals in retirement can be tax free, while others may need to adjust their budgets to account for paying taxes on catch-up contributions now rather than later. Employers also must ensure their retirement plans are properly structured to allow Roth catch-up contributions, which adds another layer of complexity for both businesses and employees.
With these new rules approaching, now is the time to review your retirement and estate planning strategy. Understanding how catch-up contributions fit into your broader financial plan can help you make informed decisions that support your long term goals and protect your future. At Grissom Law Firm, LLC we work with clients and their advisors to ensure their estate plan aligns with changes in the laws and their needs. Contact our experienced estate planning attorney today to schedule a consultation and take the next step in securing your financial future with confidence.
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