The New 401(k) Rule That Could Change Your Retirement Tax Strategy in 2026

The New 401(k) Rule That Could Change Your Retirement Tax Strategy in 2026

Starting in 2026, one of the most under-the-radar changes to retirement plans in years goes into effect — and it’s aimed squarely at high earners over 50.

If you’ve enjoyed using pre-tax 401(k) catch-up contributions to lower your tax bill, Uncle Sam would like a word.

What’s Changing?

If you are age 50 or older and earned more than $145k (indexed for inflation) in the prior year, any catch-up contributions you make in 2026 must be made as Roth contributions.

Translation: You don’t get the tax break now. You pay the tax now.

Your future retired self may thank you. Your current CPA might need a moment.

This change comes from SECURE 2.0 — which, despite the comforting name, does not mean your taxes feel more secure.

Who This Applies To

You’re affected if:

1. You’ll be 50 or older in 2026.

2. You made more than $145k in 2025 (based on FICA/Medicare wages).

3. Your employer offers a Roth 401(k) option.

If that’s you, every dollar of your catch-up contribution must go into the Roth bucket.

No more choosing pre-tax to soften the April sting.

If you’re under the income threshold, congratulations — you still get options. Enjoy them while they last.

Why This Matters

For years, catch-up contributions were a beautiful thing:

• Make an extra $8k contribution.

• Reduce taxable income.

• Feel smart.

• High-five yourself.

Starting in 2026, higher earners still get the $8k catch-up (and even higher “super catch-up” amounts at ages 60–63)… but it goes in after-tax.

Instead of reducing your taxable income, you’re pre-paying taxes for future tax-free growth.

Think of it as buying freedom in advance.

Or as the IRS saying, “We’ll take our cut now, thank you.”

Important Details to Know

The Income Test Uses FICA Wages

This isn’t based on your adjusted gross income. It’s based on Medicare wages from your W-2. Translation: that surprise bonus you were excited about? It might also surprise you here.

Your Plan Must Offer Roth If your employer’s plan doesn’t have a Roth option and you’re over the income threshold, you can’t make catch-up contributions at all.

Yes, that’s as awkward as it sounds.

Contribution Limits Stay the Same The catch-up limit remains $8k (indexed), with larger limits for ages 60–63.

The amount doesn’t change. The tax timing does.

Planning Opportunities (Because There Always Are)

Before we panic — this isn’t necessarily bad.

In fact, for many high earners who expect strong retirement income, Roth dollars can be incredibly valuable.

This change creates planning conversations like:

• Should you increase Roth contributions earlier in your career?

• Does forced Roth actually improve your long-term tax diversification?

• Should you coordinate bonus timing if you’re near the threshold?

• Does this make Roth conversions more or less attractive?

Sometimes the government forces good diversification. Not intentionally. But it happens.

Bottom Line

Starting in 2026, high earners over 50 lose the ability to make pre-tax 401(k) catch-up contributions. Those dollars must go Roth.

It’s not a disaster. It’s not a loophole closing apocalypse. But it is a meaningful shift in retirement tax strategy.

And the earlier you plan for it, the less it feels like a surprise tax plot twist.

Your future retired self sipping coffee tax-free may actually approve.