No More Pre-Tax Catch-Up?

If you’re age 50 or older and earning more than $145,000 a year, a major shift is coming to how you save for retirement. Starting in 2026, you’ll be required to make your catch-up contributions on a Roth (after-tax) basis — meaning no more upfront tax break for these extra savings.

The IRS just finalized the regulations that clarify this rule under the SECURE 2.0 Act. That gives you a two-year window to plan — and possibly rework your retirement and tax strategy.

What’s Changing?

As of January 1, 2026:

• Workers aged 50+ who earned more than $145,000 from their employer in the previous year will no longer be allowed to make pre-tax catch-up contributions to their workplace retirement plans (like 401(k)s or 403(b)s).
  
• Instead, all catch-up contributions must go into a Roth account, using after-tax dollars.
  
• The IRS has confirmed that employers must enable Roth catch-up contributions or risk being out of compliance.

Who’s Affected?

This rule targets:

• High-income pre-retirees (age 50+) actively contributing to 401(k)s or similar plans.
  
• Plan sponsors and small business owners who offer workplace retirement plans and must update their systems.
  
• Adult children of retirees who may be entering peak earning years and relying on catch-up contributions.
  

Even if you’re already retired, it may impact your spouse, clients, or family members.

What It Means for Your Retirement Plan

1. No More Upfront Tax Deductions

Losing the ability to deduct catch-up contributions could increase your taxable income — possibly bumping you into a higher bracket or increasing Medicare IRMAA surcharges.

2. More Tax-Free Income Later

Roth contributions grow tax-free and are distributed tax-free in retirement. This can be a powerful long-term advantage — especially if you expect taxes to rise or want more control over your taxable income later in life.

3. Strategic Adjustments Are Needed

Now’s the time to review:

• Your Roth vs. traditional contribution mix.
  
• Whether Roth conversions should be part of your multi-year tax plan.
  
• The impact on your required minimum distributions (RMDs) and retirement cash flow.
  

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What To Do Before 2026

✅ Check your plan — Confirm whether your current 401(k) or 403(b) offers Roth contribution options.
✅ Revisit your 2025 tax plan — It may be wise to front-load traditional catch-ups while they’re still deductible.
✅ Update your retirement income projections — Including the after-tax impact of Roth catch-up contributions.

Key Takeaways

• Starting in 2026, high earners over 50 must make Roth catch-up contributions.
  
• There’s no change to contribution limits — only how they’re taxed.
  
• This shift could benefit long-term savers, but reduce current-year deductions.
  
• Now is the time to coordinate Roth strategies, income planning, and tax minimization.

Ready to Adjust Your Strategy?

Big changes are coming to catch-up contributions in 2026 — and now’s the time to prepare.

If you’re unsure how the new Roth rules could impact your tax strategy, retirement plan, or income outlook, we’re here to help.

Just call Barb Swiatek at 719.597.2179 to start the conversation.

We’ll walk you through:

• How this rule could affect your 2025–2026 tax picture
  
• Whether a Roth-focused approach makes sense for your goals
  
• What planning moves can help you stay ahead of the curve
  

Smart retirement planning starts with clarity — and that’s what we’re here to provide.