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If you’re over 50 and contributing to a 401(k), there’s a change coming that’s getting a lot of attention — and understandably so.

Starting in 2026, if you earn more than $145,000 in wages from your employer, your catch-up contributions (those extra dollars you can contribute once you hit age 50) will have to go into a Roth 401(k). In other words, no more pre-tax catch-up contributions — they’ll be made with after-tax dollars whether you like it or not.

This rule was introduced as part of SECURE Act 2.0 back in 2022, and while it was originally set to go into effect in 2024, the IRS granted a two-year delay. But now that 2026 is around the corner, it’s time to take this seriously.

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Here’s the reality: this change will hit some people harder than others.

If you’re still in your peak earning years, you might not love the idea of losing the tax deduction that came with making catch-up contributions on a pre-tax basis. For some, it could mean a higher taxable income and a bigger tax bill in the short term. It feels a bit like a penalty for doing the right thing — saving more for retirement.

But here’s the part that’s not being talked about enough: this could actually be a smart move for many people — whether they’re forced into it or not.

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Let’s take a step back.

Roth contributions are made with after-tax dollars, yes — but they also grow tax-free, and more importantly, they come out tax-free in retirement. For many high earners, retirement brings the possibility of being in a similar or even higher tax bracket (especially if tax rates go up — and let’s be honest, that’s not a wild assumption). In that context, having a bucket of tax-free income to draw from in retirement is incredibly valuable.

This rule effectively nudges people toward a more tax-diversified retirement — and while it’s uncomfortable now, it could end up being a net positive. Tax-free income is a powerful planning tool in retirement, and most people don’t have enough of it.

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That said, this isn’t a one-size-fits-all win.

The people who may feel the sting the most are those who are:

• Just starting to catch up on retirement savings later in life,
• In a very high tax bracket now,
• Or relying on catch-up contributions specifically for the immediate tax deduction.

There’s also a practical issue: not every 401(k) plan currently allows Roth contributions. Employers will need to make that available, and not all are moving quickly. Hopefully, the delay until 2026 gives them enough time to catch up (pun intended).

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So what’s the takeaway?

Yes, this change may disrupt how you’ve approached retirement contributions in the past. But it also opens the door to better long-term planning — if you’re thoughtful about it.

Now is a great time to take a closer look at your overall retirement strategy. Do you have enough tax-free income options? Are you over-relying on pre-tax accounts? Could this be a good reason to rebalance?

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We’ll be helping clients think through these questions over the next few months. If you’re wondering how this will impact you personally — let’s talk. The earlier we plan, the more flexibility you’ll have when the rule kicks in.

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Further Reading & References:

• IRS Issues Final Regulations on SECURE 2.0 Catch-Up Provisions
• Treasury IRS Guidance on Catch-Up Contributions

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This article reflects our perspective as of September 2025. As always, consult your tax advisor before making any decisions based on upcoming legislation.

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