While the OBBBA legislation has dominated financial conversations these days, measures passed within the SECURE Act 2.0 of 2022 take effect in 2026. For those who earn more than $150,000 in FICA wages, there are important 401(k) catchup changes coming your way.
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● Starting in 2026, highly paid participants who earned more than $150,000 in FICA wages the prior year must make all 401(k) catchup contributions as Roth (after-tax) contributions. ● This eliminates the ability to take tax deductions on the catch-up contributions. |
Changes to Tax Treatment of Catch-Up Contributions in 2026
For some employees, changes are coming to how catch-up contributions are taxed in 2026.
A quick refresher: individuals age 50 and older are allowed to make catch-up contributions to their retirement accounts. This is in addition to the standard contribution limit.
For 2026, catch-up contribution limits for your 401(k) are as follows:
- $8,000 for individuals age 50 – 59
- $11,250 for individuals age 60 – 63 (known as “super catch-ups”)
There are two types of retirement contributions:
- Traditional (pre-tax) contributions: Money goes into the account pre-tax, reducing your taxable income now. However, you’ll pay taxes on the money and its growth when you withdraw it in retirement (after age 59 ½).
- Roth contributions: Your contribution is not tax deductible, but you won’t owe taxes on it (or any growth) once you withdraw the money in retirement (after age 59 ½).
Previously, catch-up contributions could be made pre-tax, just like your standard contributions.
However, starting in 2026, that will no longer be the case for employees who earned more than $150,000 in FICA wages (the portion of wages subject to payroll taxes) in the previous tax year.
For highly paid participants (HPPs) catch-up contributions must now be designated as Roth contributions in 2026.
Thus, catch-up contributions for HPPs can no longer be treated as a tax deduction for the same tax year that the contribution is made.
Maximize your 2025 tax year retirement contributions
If you are eligible to make catch-up or super catch-up contributions to your 401(k) in tax year 2025 but have yet to max out your contributions, it is not too late to do so. You can still make contributions for tax year 2025 up until the tax filing deadline of April 15, 2026. Take advantage of pre-tax catch-up contributions for tax year 2025 prior to the Roth deferral rule going into effect for tax year 2026.
Make a retirement plan beyond just your 401(k)
If you’re looking to lower this year’s tax bill while maximizing your retirement contributions, reach out to a Landmark Financial advisor to discuss your retirement planning options beyond just your 401(k).