If you’re 50 or older and earning more than $145,000 a year, there’s a major change coming to your retirement planning — and it could cost you thousands of dollars in tax savings.
Starting in 2026, you’ll no longer be able to make pretax catch-up contributions to your 401(k). Instead, those extra contributions — designed to help older workers supercharge retirement savings — will have to go into a Roth account. That means paying taxes on the money now, instead of deferring taxes until retirement.
Why This Matters
For years, the “catch-up” provision has been a powerful tool. Workers over 50 could put an additional $7,500 into their 401(k) beyond the standard annual limit, reducing taxable income today while boosting retirement savings. Losing that deduction could increase a high earner’s annual tax bill by $2,700 to $4,000, depending on their state.
What’s Changing
- Who’s affected: Workers 50+ making more than $145,000 in wages from a single employer.
- When it starts: 2026.
- What’s different: Extra contributions must be Roth, not pretax.
While Roth accounts grow tax-free and withdrawals in retirement aren’t taxed (under current tax law), the immediate hit is higher taxes now.
What You Can Do
If you’re in the affected group, here are some planning strategies:
- Adjust your tax plan early. Work with a financial advisor to anticipate the bigger tax bill.
- Leverage Roth benefits. While you lose the upfront deduction, you gain long-term tax-free growth as long as future tax changes do not affect Roth distributions.
- Diversify accounts. A mix of traditional and Roth savings could provide flexibility in retirement.
