Starting in 2026, high earners in the United States will face a significant change in how they can make catch-up contributions to their 401(k) retirement accounts. The Internal Revenue Service (IRS) recently issued new regulations under the SECURE 2.0 Act, which affects individuals earning $145,000 or more annually. These workers will be required to make their catch-up contributions to after-tax Roth accounts instead of traditional pre-tax accounts.
Previously, workers aged 50 and older could make additional catch-up contributions to either a traditional or Roth 401(k) account. The traditional account option allowed them to reduce their taxable income for the year. However, from 2026 onwards, high earners will no longer have the option to receive this upfront tax break on their catch-up contributions. Instead, these contributions will grow tax-free and can be withdrawn tax-free during retirement, provided certain conditions are met.
The change is part of the IRS’s efforts to implement the SECURE 2.0 Act, which aims to enhance retirement savings options for Americans. The new rule will impact those who earned $145,000 or more in the prior year, with the income threshold subject to inflation adjustments.
While the rule change presents a potential disadvantage by increasing current tax liabilities for high earners, it also offers benefits. As CNN reports, contributions to Roth accounts allow for tax-free growth and withdrawals, providing greater financial flexibility during retirement. Moreover, unlike traditional 401(k) accounts, Roth accounts do not require minimum withdrawals at age 73.
The IRS has provided guidance for plan administrators to comply with the new regulations, which will apply to taxable years beginning after December 31, 2026. The IRS also allows for an earlier implementation of the Roth catch-up requirement under certain conditions.
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