Are you nearing retirement and relying on that extra tax break for your 401(k) contributions? Brace yourself, because a major change is coming that could significantly impact your tax bill. The IRS has just revamped a popular tax break for 401(k) catch-up contributions, and it’s not all good news for high earners. Starting in 2026, if you’re earning $145,000 or more, you’ll be required to make your catch-up contributions to an after-tax Roth account instead of the traditional before-tax option. But here’s where it gets controversial: while this change aims to balance tax benefits, it effectively limits the upfront tax deduction high earners have enjoyed for years. Is this a fair move, or does it unfairly penalize those saving diligently for retirement?
Let’s break it down. Until the 2025 tax year, workers aged 50 and older could choose to make their catch-up contributions to either a traditional before-tax 401(k) or an after-tax Roth account. The before-tax option allowed them to reduce their taxable income immediately, providing an instant financial boost. However, under the new rules—part of the SECURE 2.0 Act—high earners will lose this flexibility. And this is the part most people miss: if your employer’s retirement plan doesn’t offer a Roth 401(k) option, you might be left in limbo, unable to make catch-up contributions until they do.
For context, catch-up contributions are additional amounts workers over 50 can save beyond the standard 401(k) limits. In 2025, that means an extra $7,500 on top of the $23,500 standard limit for those under 50. Workers aged 60 to 63 can contribute even more—up to $11,250 in catch-up contributions. But with the new rules, high earners will no longer enjoy the upfront tax deduction, which could increase their taxable income in the short term.
Here’s the silver lining: Roth accounts offer tax-free growth and withdrawals in retirement, which can be a significant long-term benefit. However, the lack of an immediate tax break might feel like a step backward for some. Employers are catching on, though—The Wall Street Journal reports that Roth 401(k) options are becoming more common, with Fidelity now offering them in 95% of managed plans, up from 73% just two years ago. Vanguard isn’t far behind, with 86% of its plans including a Roth option.
So, what does this mean for you? If you’re a high earner, start planning now. Consider whether the long-term tax-free benefits of a Roth account outweigh the loss of the upfront deduction. And if your employer doesn’t offer a Roth option, it might be time to advocate for one. But here’s the big question: Is this change a necessary adjustment to the tax system, or does it unfairly target high earners who are simply trying to save for retirement? Let us know your thoughts in the comments—this is a conversation worth having!
