Catch-Up Contributions in 2026

The SECURE 2.0 Act passed right at the end of 2022. While it’s not quite BC (before COVID), it’s still nearly 3 years ago. Most notably, it adjusted the required minimum distribution (RMD) age for IRA owners not already subject to RMDs, but there was something else in there that needs a good refresher: Roth catch-up contributions for high earners. If that’s not ringing any bells or there’s a lot of cobwebs on that, you’re in good company, so let’s break it down.

What is a “catch-up” contribution?

Consider this a savings bonus for attaining at least age 50 at the end of the calendar year. This catch-up contribution allows a participant an extra savings opportunity. This extra contribution applies to various accounts: 401(k), 403(b), 457, SIMPLE plans, Traditional & Roth IRAs. The 2025 amount varies by account: $1,000 for a Traditional or Roth IRA, $3,500 for a SIMPLE plan, and $7,500 for a 401(k), 403(b), or 457.

You may remember hearing about the Super Catch-Up Contributions from us earlier this year, and that is still in play. If you can and are eligible, be sure to take advantage of this before year-end.

Even an H.S.A. has a catch-up contribution of $1,000, but you must be 55 or older to qualify.

So, what’s the catch?

Starting in 2026, if your 2025 wages exceed $150,000, your catch-up contributions to an employer plan must be made as Roth contributions. If you are all for paying your taxes now and taking advantage of that tax-free growth for retirement, this is good news for you! However, if you were hoping for tax planning purposes that you’d be able to lower your taxable income with pre-tax contributions, this may not be welcome news.

There is another potential rub. Not all employer plans offer a Roth option. If you’re in this boat, you will be ineligible to do catch-up contributions. To keep your savings on track, consider the following options:

1. You may be able to max out a Roth IRA ($8,000 for 2025). Those income limits start phasing out at $150,000 for single filers and $236,000 for married filing joint filers for 2025 contributions.
2. If you’re over the Roth IRA contribution limit, redirect what you were putting into the catch-up into a taxable brokerage account.
3. If you’re eligible for an H.S.A. and aren’t already maxing it out, increasing those contributions without drawing on the account for medical expenses is a powerful tax-advantaged savings tool.

How are Employers handling the catch-up transition – new for January 2026

Employers are handling the catch-up transition in a variety of ways. Our most important tip is to understand your employer’s approach and adjust accordingly. Here are the two most common methods:

1. Automatically transitioning you to Roth contributions once you’ve maxed out the $24,500 regular contributions. This method is great, and definitely the easiest / least error prone.
2. Requiring you to make a separate catch-up election for Roth contributions. We’re seeing this even from some employers who previously didn’t require you to make a catch-up election. Previously, they would just switch you to catch-up contributions when you’d maxed out the regular if you were 50+. But now these employers are requiring the employee to opt in to the Roth catch-up. This method is the most likely to cause unpleasant surprises if you’re not monitoring your paycheck deductions. If you don’t catch it until too late in the year, you may just miss out on contributing the catch-up. So please check now and make any necessary elections.

Should you still make catch-up contributions?

Yes, if your employer offers the Roth catch-up option! If you were previously doing a catch-up contribution and want to continue saving at that level, we highly recommend it. The Roth 401k is far superior to shifting that $8,000 (or $11,250 super-catch-up) to a taxable investment account — unless you expect to want access to those funds prior to age 59.5 or separating from your employer. With the Roth 401k, you benefit from tax-free growth for the rest of your life. Compare that to a taxable investment account where all of your dividends and capital gains will be taxed as you go. The tax treatment is the same going in — contributions for both Roth 401k and the taxable investment account will be included in your regular income tax calculation. But once the funds are in the account, the treatment is quite different.

Aren’t there income limits for Roth contributions?

We commonly hear clients worried they’re ineligible for 401k Roth catch-up contributions because of their income. Fortunately, there is no income limit to contribute to Roth in your 401k. The income limit on Roth contributions applies to Roth IRAs, not 401ks. Those at any income level with Roth 401k access can contribute at the same level as they can for pre-tax contributions.

Not sure what to do?

If you find yourself having to change how you’re saving, please don’t hesitate to reach out to us. We’d be happy to discuss the options and provide a path forward toward creating a more tax-diversified portfolio.