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A popular tax break for workers approaching retirement age to make additional catch-up contributions is changing next year, limiting access to some higher earners.
The IRS issued new rules last month to implement a provision of the 2022 law, known as the SECURE 2.0 Act, which requires high-income people who earned $145,000 or more in gross income as an individual in the past year to file a tax return. 401(k) catch-up contributions After-tax on Roth accounts starting in the 2026 tax year.
Under the rules that remain in effect through the 2025 tax year, workers age 50 and older were eligible to make their 401(k) catch-up contributions to either a pre-tax traditional account or one. after-tax roth The account depends on their preferences and what their retirement plan allows.
Making catch-up contributions on a pre-tax basis allows workers to get an upfront tax break by using deductions to reduce their taxable income — but the change means those earning more than the income limits won’t have that option starting in the 2026 tax year.
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New IRS rules will mean that 401(k) catch-up contributions from high earners will not be eligible for a tax break starting in 2026. (iStock/iStock)
Catch-up contributions are made in addition to the normal Contributions to 401(k) accounts,
In 2025, eligible workers over the age of 50 can contribute an additional $7,500 to their 401(k) in catch-up contributions on top of the standard contribution limit of $23,500 for workers under the age of 50.
There’s also a higher limit for workers ages 60 to 63, who can make up to $11,250 in catch-up contributions in 2025.
New IRS rules change 401(k) catch-up contributions for high-income earners starting in 2026. (J. David Ake/Getty Images/Getty Images)
Workers whose employer-sponsored retirement plans do not currently have a Roth 401(k) option may be unable to make catch-up contributions until one becomes available.
The Wall Street Journal reported Employers are adding Roth 401(k) options, with Fidelity now including it as an option in 95% of managed plans, up from 73% two years ago, while 86% of Vanguard-managed 401(k) plans offer a Roth.
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While savers who contribute to traditional 401(k) accounts get an upfront tax break, they must pay income taxes on future withdrawals.
In contrast, contributions to Roth accounts lack the initial tax exemption, but have tax free growth And withdrawal.
