A Big Change to Catch-Up Contributions
By: Baden James
Download a PDF file of the article here.
Starting in 2026, a major shift in the U.S. retirement system takes effect for many savers: certain catch-up contributions in employer-sponsored retirement plans must be made on a Roth (after-tax) basis rather than the traditional pre-tax basis people have used for decades. This change affects older workers who are earning above a specified income threshold and is one of the most significant retirement tax changes in recent years.
What Are Catch-Up Contributions?
Catch-up contributions are extra retirement savings contributions allowed for employees aged 50 and older in addition to the standard annual limits. They’re designed to help those nearing retirement “catch up” on savings they may have missed earlier in their careers. For example, in 2026, the base 401(k) contribution limit is $24,500, and workers 50+ can add an $8,000 catch-up contribution beyond that limit. Workers aged 60-63 have a higher “super catch-up” limit of $11,250.
Historically, catch-ups could be made either as pre-tax (traditional) or after-tax Roth contributions — depending on an individual’s plan options and personal tax strategy.
What’s Changing in 2026?
Under the new rule:
If you are age 50 or older and
Your prior year wages from your employer exceed a certain threshold (about $150,000 in 2025 for 2026 contributions) then all your catch-up contributions for 2026 must be made as Roth (after-tax) contributions — regardless of whether you’d prefer the traditional, pretax approach.
That means you’ll pay taxes on the catch-up amount this year, even though traditional catch-ups would otherwise reduce your taxable income. While Roth contributions don’t reduce your current taxes, they grow tax-free and qualified withdrawals are tax-free in retirement.
If your plan does not offer a Roth option, then, under the rule, you cannot make catch-up contributions at all — unless your employer amends the plan to add Roth deferrals.
Where Did This Rule Come From?
This new requirement stems from a major retirement law passed by Congress — the SECURE 2.0 Act of 2022.
SECURE 2.0 Act: Signed into law at the end of 2022 as part of a broad federal spending and retirement reform bill, the SECURE 2.0 Act made dozens of changes to retirement plans with phased-in implementation dates through the 2020s. One key provision (Section 603) mandates that catch-up contributions for certain higher-earning participants must be designated Roth contributions.
Implementation Delay and IRS Rules: Although the Roth catch-up rule was originally supposed to kick in earlier, the IRS provided a transition period to give employers and plan administrators time to update systems and communicate with employees. Under IRS guidance and final regulations issued in 2025, the Roth catch-up rule generally applies to contributions in taxable years beginning January 1, 2026, with a reasonable, good-faith compliance standard through the end of the year.
Why the Change Was Made
The goal of this provision is two-fold:
Increase tax revenue up front: By requiring catch-ups to be after-tax, the IRS collects tax revenue sooner (when the money goes in) rather than later (when it’s withdrawn). That helps pay for other parts of SECURE 2.0 and broader budgeting goals.
Encourage long-term tax-free savings: Roth savings grow tax-free and aren’t subject to required minimum distributions (RMDs) once rolled to certain Roth accounts, benefiting savers who expect to be in equal or higher tax brackets during retirement.
What This Means for Workers
If you earn over the threshold (about $150,000 in 2025 wages for 2026), your catch-up contributions will be after-tax (Roth). It’s no longer your choice solely based on preference.
If your plan doesn’t offer Roth contributions, you may lose the ability to make catchup contributions unless your employer adapts the plan.
If you earn below the threshold, you generally can still choose between traditional and Roth catch-up contributions — if your plan allows.
Final Thoughts
The Roth catch-up rule is a big shift for pre-retirees and high earners who’ve traditionally relied on the tax break of pre-tax catch-up contributions. While the up-front tax hit may feel less appealing, the long-term benefit of tax-free growth can be a powerful addition to a retirement strategy — especially if you expect tax rates to rise or anticipate a long retirement.
That said, this change requires attention in year-end planning and may impact your broader tax picture in 2026 and beyond.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
A Roth offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Pillar Wealth Partners.
