As we move closer to 2026, it's a critical time for those approaching retirement to review their savings strategy, especially in light of new provisions from the SECURE 2.0 Act. A significant change is coming for "catch-up" contributions to employer-sponsored retirement plans, and for higher-income earners, it’s all about the Roth.
What's Changing in 2026?
Catch-up contributions allow workers age 50 and older to save more than the standard annual limit in their workplace retirement accounts (like a 401(k)). Historically, these extra contributions could be made on a pre-tax basis.
Starting in January 2026, a new rule goes into effect for employees who earned more than $145,000 in FICA wages in the prior calendar year (this threshold is indexed for inflation).
For these higher earners, all catch-up contributions to a 401(k), 403(b), or governmental 457(b) plan must be made as Roth (after-tax) contributions.
- If you are a high earner: Your catch-up dollars will no longer provide an upfront tax deduction, but they will grow tax-free, and qualified withdrawals in retirement will be tax-free.
- If you are not a high earner (prior year wages ≤ $145,000): You can continue to make catch-up contributions as either pre-tax or Roth, if your plan allows.
What About an IRA?
It is important to note that this new mandatory Roth requirement does not apply to IRAs (Traditional or Roth). The catch-up contribution for an IRA (which is $1,000 for 2025, in addition to the standard limit) can still be made to a Traditional or Roth IRA, subject to standard income limitations for deductibility or Roth eligibility.
Key Takeaways for Your Retirement Plan
- Review Your Income: If your prior-year FICA wages exceed the limit (currently $145,000 and indexed), your 401(k) catch-up contributions in 2026 will be mandatory Roth.
- Tax Planning Opportunity: While losing the upfront deduction stings, this mandate forces higher earners to diversify their tax profile with more tax-free income in retirement—a powerful tool for managing future tax burdens.
- Check Your Plan: Your employer's 401(k) plan must offer a Roth contribution option for you to make catch-up contributions starting in 2026 if you meet the income threshold. If your plan doesn't offer a Roth 401(k), and you are a high earner, you may be unable to make any catch-up contributions to that plan.
The 2026 change presents a good opportunity to re-evaluate the role of pre-tax vs. after-tax savings in your overall retirement picture.
Source: USA Today – “401(k) catch-up contributions to switch to Roth in 2026”
This material is for informational purposes only and is not intended to be a substitute for professional tax advice. Please consult with your DFW Wealth Strategies advisor and a qualified tax professional to understand how these changes will specifically impact your personal financial and tax situation.