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Under new rules, you may lose an up-front deduction but gain tax-free income once you retire.
By
David Rodeck
published
1 January 2026
in Features
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In a shift that could spur broader adoption of Roth retirement accounts by both employers and workers, higher-income employees who make catch-up contributions to a workplace plan in 2026 will see a big difference in how those extra dollars are taxed.
Under new SECURE 2.0 Act rules taking effect on January 1, employees age 50 and older who earned more than $150,000 in 2025 are now required to use a Roth 401(k), 403(b) or 457(b) account for catch-up deposits instead of a traditional savings plan funded with pretax dollars. "That means they’ll pay taxes on those contributions now but will be able to withdraw them, plus investment earnings, tax-free in retirement," says Dina Caggiula, head of participant experience at Vanguard.
Before this change, the choice of whether to make catch-up contributions via a Roth or a traditional workplace retirement account was yours, no matter how much you earned — and most people picked the traditional, pretax version. With that account, you get a tax deduction for contributions in the year you make them but pay income taxes when you take money out in retirement.
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Sign upPlanning to make catch-up contributions in 2026? Here's what you need to do now.
Know what counts as a catch-up
The new rule applies only to catch-up contributions, which allow workers age 50 and older to save more for retirement than younger colleagues.
In 2026, if you're age 50 to 59 or age 64 or older, you can save an additional $8,000 in your 401(k) above the standard annual limit of $24,500, for a total of $32,500. If you're between 60 and 63, you can kick in an extra $11,250, pushing your max to $35,750.
Even if you earned more than $150,000 in 2025, you can still make regular 401(k) contributions up to the $24,500 limit in a traditional, pretax account and get the up-front deduction, says Ian Berger, a retirement plan expert with Ed Slott and Company, which trains financial advisers. If you earned less, you can continue saving via a Roth or a traditional account, whichever you prefer, for both regular and catch-up contributions.
Determine whether you have access
A potential wrinkle: While higher earners will now be limited to Roth-only catch-up savings, the law does not require employers to offer Roth accounts. That could leave some workers unable to make catch-up contributions at all.
You're likelier to have access if you work for a big company. Vanguard (PDF) reports that 95% of businesses with 1,000 or more employees offer a Roth option, versus 76% of those with fewer than 500 people on staff. To make sure, check with your HR department or plan administrator.
Berger expects the new rule will prompt more firms to add a Roth to their plan lineup. He says companies don't want to upset their highest-paid employees, and often, business owners themselves face the same catch-up restriction.
Playing catch-up
The more you earn, the likelier you are to make catch-up contributions to a 401(k), if eligible.
Swipe to scroll horizontallyINCOME
% Making Catch-up Contributions
$15,000 – $49,999
< 0.5%
$50,000 – $74,999
1
$75,000 – $99,999
4
$100,000 – $149,999
15
$150,000 +
51
Source: Vanguard
Consider the value of tax-free retirement income
The change may also nudge more workers to opt for a Roth. Even though usage has been rising recently, only 18% of 401(k) plan participants choose a Roth, Vanguard reports — including just 14% of workers ages 55 to 64 and 21% of savers earning more than $150,000, who are now required to make catch-up contributions in them.
"Roth participation has grown by 50% over the past five years, and we expect to see it continue to grow due to several factors, including the SECURE 2.0 provision and increased general awareness of Roth options among participants," says Caggiula.
No matter what your age and income, Caggiula suggests thinking about a Roth for at least a portion of your future 401(k) contributions to diversify how your savings will be taxed once you retire, particularly given today’s historically low rates.
"Tax-free income in retirement can be a big advantage if tax rates rise in the future or for those who expect to be in a higher bracket later in life," says Caggiula.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related Content
- New SECURE 2.0 Super 401(k) Catch-Up Contribution for Ages 60-63
- 5 Ways to Catch Up on Retirement Savings
- The Average 401(k) Balance by Age and Generation
- Convert a Traditional 401(k) into a Roth 401(k): An Ideal Move for High Earners
David RodeckSocial Links NavigationContributing Writer, Kiplinger's Retirement ReportDavid is a financial freelance writer based out of Delaware. He specializes in making investing, insurance and retirement planning understandable. He has been published in Kiplinger, Forbes and U.S. News, and also writes for clients like American Express, LendingTree and Prudential. He is currently Treasurer for the Financial Writers Society.
Before becoming a writer, David was an insurance salesman and registered representative for New York Life. During that time, he passed both the Series 6 and CFP exams. David graduated from McGill University with degrees in Economics and Finance where he was also captain of the varsity tennis team.
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