This year marks the start of a significant tax legislation update affecting many high earners nearing retirement. Since 2002, the federal government has permitted employees over the age of 50 to make additional contributions to their retirement accounts beyond the annual limit, creating greater saving opportunities for eligible employees. As of January 1, 2026, however, the SECURE 2.0 Act changed the rules for high earners, restricting how and when catch-up contributions can be made.
Below, we’re sharing what’s changed and how to still make the most of your catch-up contributions before retirement. We’ve also included insights from Jessica Varney, CPA, owner of Tuxedo Tax & Consulting. Jessica brings over 15 years of experience in public accounting, giving her a well-rounded perspective on the tax and financial landscape. Insight that’s increasingly valuable as new legislation like SECURE 2.0 continues to reshape planning decisions.
What Are Catch-Up Contributions?
Catch-up contributions are a strategic savings opportunity for employees approaching retirement age. In general, all employees can contribute to their traditional or Roth 401(k) up to the annual limit. In 2026, the limit is $24,500 for those under 50. However, the federal government allows employees over the age of 50 to make additional contributions, known as “catch-up contributions,” up to $8,000 for 2026.1
You might choose to take advantage of catch-up contributions for several reasons:
- You’re in your final years of work before retiring
- Your income is higher than before, and you have more to contribute
- You need more funds to retire comfortably
Catch-up contributions are common among high earners, with 50% of retirement plans having received such contributions from participants earning more than $150,000 in 2023.2 For this reason, it’s important to understand how the SECURE 2.0 Act changes work if you fall in this earning category.
SECURE 2.0 Act Changes
In 2022, Congress passed the SECURE 2.0 Act to promote increased retirement savings for working Americans.3 Key changes included:
- Expanding automatic retirement plan enrollment
- A higher Required Minimum Distribution (RMD) age
- Eliminating RMDs for Roth 401(k) accounts
- Changes to catch-up contributions
The introduction of the “super catch-up” contribution, for example, is a landmark effort to help older working Americans save more for retirement. As of 2025, employees between the ages of 60 and 63 can contribute above both the annual limit and the standard catch-up contribution for a total of $35,750. Each year, this new contribution limit is set at either $10,000 or 150% of the regular catch-up contribution, whichever is greater.
At the same time, older employees who are also high earners face a new rule affecting their catch-up contributions.
Beginning January 1, 2026, employees age 50 or older who earned over $150,000 of wages in the previous year are required to direct catch-up contributions to their 401(k) into a Roth account.
Previously, all eligible employees could make catch-up contributions with pre-tax dollars to their traditional 401(k), regardless of income. This change has the potential to impact taxes for high earners in the years contributions are made and when they’re distributed in retirement.
Challenges With the New Catch-Up Rule
Roth-only catch-up contributions come with three main considerations that may inform how you choose to plan and save. The extent to which these challenges affect you depends on your personal financial situation, employer offerings, and overall financial plan.
Roth Contributions Are Not Tax-Deductible
Earners who made more than $150,000 in the prior year lose the tax benefit of pre-tax catch-up contributions, which are put directly into your retirement account from your paycheck and lower your taxable income for the year. With Roth catch-up contributions, you’ll pay income tax upfront, and your taxable income remains the same. However, qualified withdrawals in retirement will be tax-free.
If you relied on pre-tax contributions to lower your taxable income, you may need to look at alternative tax savings measures to offset the change.
Availability Depends on Your Employer
High earners can only make catch-up contributions if their employer offers a Roth 401(k) option. While 95.6% of plans now offer a Roth contribution option, those in the remaining few without Roth access will not be able to make catch-up contributions.4
Roth Contributions Are Subject to a Five-Year Rule
As is the case with any Roth account, your first Roth contribution should be made at least five years before you plan on withdrawing. Otherwise, your withdrawals may not qualify for the tax-free treatment. Given that catch-up contributions are made close to retirement age, it’s important to plan accordingly.
Opportunities for 401(k) Plan Participants
We asked Jessica Varney, CPA, owner of Tuxedo Tax & Consulting, what opportunities she’s seeing for 401(k) participants under the new rules, where there may be a silver lining, and what remains uncertain.
“Roth accounts are funded with after-tax contributions, which can mean your catch-up contributions are being taxed at your current tax bracket – not the tax bracket that you will be in when retired. Although the current tax rate may seem high, there is no crystal ball as to what tax rates and brackets may look like in future years. While you pay the taxes upfront, the earnings still grow tax-deferred, and qualified withdrawals in retirement are tax-free. Roth catch-up contributions may help diversify your retirement savings and tax exposure, offering several key benefits for 401(k) plan participants.”
No Required Minimum Distributions During Your Lifetime
“With no required minimum distributions for Roth 401(k)s beginning in 2024, you won’t have to start withdrawing at a certain age. Your funds can continue growing tax-free for as long as you wish. You also maintain greater control over your future income and tax planning as well – there’s no risk of required distributions pushing you into a higher tax bracket and no worry about paying a large tax bill if you need additional cash for any unexpected reason.”
Your Beneficiaries Will Thank You
“In fact, Roth 401(k)s are ideal for transferring wealth after death, as they can provide tax-free income for your heirs. While the SECURE Act updated the RMD rules for inherited Roth retirement accounts, your beneficiaries will have the same benefit of tax-free distributions as long as the five-year holding period of the inherited Roth account is met.”
S-Corp Wages Opportunity
“Have a solo 401(k) plan with your S-Corp? If your reasonable compensation is under the $150,000 threshold at the end of the year, you can still be eligible for a pre-tax catch-up contribution the following year. While it may be too late for 2026 catch-up contributions, you can plan accordingly during the year to make your pre-tax catch-up for 2027.”
Should You Be Making Catch-Up Contributions?
Your decision to make catch-up contributions depends on your overall financial plan and how your current situation aligns with your retirement goals. While catch-up contributions may make sense for some high earners nearing retirement, others may benefit from saving or investing elsewhere, or funding other financial priorities.
If you have questions about whether catch-up contributions belong in your retirement plan, or you’d like to learn more about how the new Roth rule affects you, get in touch with our team today.
We also thank Jessica Varney, CPA, owner of Tuxedo Tax & Consulting, for her contributions to this article.
Sources:
1 “401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500.” IRS. November 13, 2025. Accessed February 23, 2026.
2 “SECURE 2.0 Act: How Many Participants and Plans Will Be Impacted by the New Catch-Up Contribution Rules for High Earners?” Public Retirement Research Lab. January 22, 2026. Accessed February 23, 2026.
3 “Securing a Strong Retirement Act of 2022” U.S. Congress. 117th Congress, H.R. 2954. March 30, 2022. Accessed February 23, 2026.
4 “Roth Option Offerings Continue to Grow.” Plan Sponsor Council of America (PSCA). December 5, 2025. Accessed February 23, 2026.
