September 24, 2025 – Last week, the IRS released final regulations for catch-up contributions, a provision of the SECURE 2.0 Act. While the official application date is January 1, 2027, the changes are already set for 2026 and require your attention now.
What’s Changing?
For years, workers aged 50 and older have had the option to make additional “catch-up” contributions to their workplace retirement plans (like 401(k)s) on a pre-tax basis. The catch-up allowed you to reduce your taxable income today, while your savings grew tax-deferred. However, the new rules bring a significant change for high earners.
Starting in 2026, if your wages from the previous year exceeded $145,000 (a threshold that will be indexed for inflation), all your catch-up contributions must be made as Roth, after-tax contributions. The new regulation means you will pay taxes on those contributions upfront, but the money will grow tax-free and can be withdrawn tax-free in retirement. For those who expect taxes to rise in the future, the Roth contribution locks in today’s lower tax rates.
The regulations also provide increased catch-up limits for those aged 60 through 63, allowing for a temporary “super-catch-up” contribution to accelerate savings just before retirement. Super catch-up contributions must also be made on a Roth basis for those earning more than $145,000.
It’s important to note that this rule only applies to your catch-up contributions. You can still make your regular contributions up to the annual limit on a pre-tax basis if you choose.
Lastly, participants who don’t receive FICA wages are exempt from the rule – these include partners and self-employed sole proprietors.
Catch-Up Contributions for High Earners – Summary Table
| Age Group | 2025 Contribution Limit | 2026 New Rule |
| 50-59 and 64+ | $7,500 | Roth if wages exceed $145k |
| 60-63 | $11,250 | Roth if wages exceed $145k |
The Impact of the New Rules
Like any significant policy change, these new regulations bring both opportunities and challenges.
Benefits:
Tax-Free Retirement Income: The most significant advantage is the ability to accumulate substantial tax-free income in retirement. This can be a powerful tool for managing your tax bracket and keeping more of your hard-earned money.
Diversification of Tax Buckets: Having both pre-tax and after-tax savings gives you more flexibility in retirement. You can strategically withdraw from different accounts to manage your taxable income and potentially lower your tax bill each year.
Increased Savings for Some: The higher “super-catch-up” limits for those between 60 and 63 are a fantastic way to quickly boost your nest egg in the final years before retirement.
Challenges:
Loss of Immediate Tax Deduction: For high earners accustomed to the tax break from pre-tax catch-up contributions, this change will reduce your current take-home pay. This could be a short-term hit to your cash flow.
Forcing a Tax Decision: The new rules effectively remove a choice for high earners, requiring them to make catch-up contributions on a Roth basis. For some, this may not align with their long-term tax strategy, especially if they expect to be in a lower tax bracket in retirement.
Administrative Complexity: Employers and payroll providers will need to update their systems to track employee wages and properly route contributions. If your employer is unprepared, you may find yourself unable to make catch-up contributions.
How to Prepare for the Change
As we approach the 2026 effective date, here are some steps to help you prepare:
Strategize Your Contributions: Your wealth manager can help you analyze whether a Roth catch-up contribution fits into your overall financial and tax plan. For some, prioritizing pre-tax deductions makes sense, while others may prefer the potential tax-free withdrawals in retirement.
Review Your Income: The Roth catch-up requirement is based on your prior-year FICA wages. Check your Form W-2, specifically Box 3 for “Social Security wages,” to see if the new rules will apply to you.
Talk to Your Employer: If your plan doesn’t currently offer a Roth contribution option, your employer must implement one. Without a Roth option, high earners could miss out on a valuable savings opportunity.