Wake up, high-income earning Americans: a tax shift the size of a wrecking ball is barreling toward your retirement account. Starting in 2026, people age 50 and over who make more than $145,000 in wages (from a single employer) will no longer be allowed to make pretax “catch-up” contributions to their 401(k). Instead, those extra dollars — intended to turbocharge retirement savings in your higher-earning years — must go into Roth accounts, meaning you pay taxes now rather than later.
This is a big deal. For decades, catch-up contributions have been a cherished loophole for folks nearing retirement to shift extra savings into tax-deferred accounts, lowering their current tax bill. Who says that Congress makes tax breaks only for wealthy people? Congress has now removed that pretax catch-up option for higher earners — and in doing so, is effectively yanking away a deduction worth roughly $2,775 to almost $4,000, depending on the state you live in.
Here’s how it works now — and how it will change:
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The current way — pretax catch-ups
If you’re 50 or older, you’ve been allowed to sock away extra money in your 401(k) beyond the standard limit. In 2025, for example, the base deferral limit is $23,500, and catch-up contributions add another $7,500. Those contributions reduce your taxable income today — exactly when you’re supposedly in your highest-earning, highest-tax-bracket years.
For those ages 60 to 63, a “super catch-up” kicks in, allowing up to $11,250 in extra contributions. Those additional dollars, under the old rules, also qualified for pretax treatment.
The strategy was slick: You defer taxes now (while your tax rate is higher), let the money grow over decades, and pay taxes later — often at a lower rate in retirement. With SECURE 2.0 Act, the required minimum distribution age will be 75.
The new rule: It’s now Roth only for high-income earners
Beginning in 2026, if your prior-year wages at a given employer exceed $145,000 (the threshold will be inflation-indexed), any catch-up contributions you make must go into a Roth — or else they’re disallowed entirely. In short: no more off-the-top tax break.
If your 401(k) plan doesn’t even offer a Roth option, you won’t be able to make catch-up contributions at all. That’s right: your golden ticket to extra retirement savings vanishes.
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Why Congress did this (and why you should care)
Proponents say this change encourages more Roth savings, which yield tax-free withdrawals in retirement. That’s not wrong — Roth accounts have their virtues — but forcing everyone over a certain income into Roth territory isn’t fair or nuanced.
What’s the real reason? It’s called $37 trillion in debt. The government gets its tax revenue now instead of waiting for decades. Sounds convenient for Uncle Sam. But for you? It just means plan to fork over more money now as you plan for taxes in 2026.
What should you do right now?
Check whether your plan offers a Roth option: If it doesn’t, you may be barred from contributing catch-ups altogether, and you might be able to influence your benefits department to add it to the plan.
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Rebalance your retirement strategy: As you revisit your retirement plan, consider whether you want to convert more dollars into a Roth 401(k) or Roth IRA now, thinking about how you might take dollars out of your overall retirement plans down the road.
Consider income timing and plan structure: Since the $145,000 threshold is based on prior-year wages at each employer, splitting income between jobs or adjusting timing might offer strategic advantages.
Explore alternative vehicles: For high earners, tools like cash balance plans or defined benefit/defined contribution hybrids may afford higher tax-deferred savings flexibility. They could allow consultants, 1099s or small corporations the ability to put away hundreds of thousands of dollars on a pretax basis.
Don’t let this shifting tax change blindside you. Congress is not just squeezing you — it’s shifting the playing field mid-game without any warning. If you’re in or approaching your high-earning, high-contribution years, now is the time to take stock and adjust your course. At $37 trillion in debt, this won’t be the last change Congress makes to carve tax breaks from high-income earners.
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