2026 401(k) Contribution Changes: Are You Affected?

If you're a high earner nearing retirement, important changes are coming to how you contribute to your 401(k). Starting in 2026, if you made $145,000 or more in wages from your employer the previous year, any catch-up contributions you make must be made on a Roth (after-tax) basis. This change, introduced under the SECURE Act 2.0, could impact your retirement tax planning and how you manage your income in retirement. Here's what you need to know to stay ahead of the rules and make the most of your savings opportunities: 

What’s Changing?

Currently, if you’re age 50 or older, you can contribute extra to your 401(k) beyond the standard annual limit, known as a catch-up contribution.

For 2025:

• Annual limit: $23,500
• Catch-up (50+): $7,500
• Total: $31,000

If you’re aged 60 to 63, your catch-up jumps to $11,250 in 2025. However, starting in 2026, if you earned $145,000 or more in FICA wages from your employer the previous year, you must make all catch-up contributions as Roth instead of pre-tax.

What This Means for You

• No more pre-tax catch-ups: You’ll pay taxes on catch-up contributions now, but withdrawals will be tax-free in retirement (if qualified).
• Your plan must offer Roth: If your employer’s plan doesn’t include a Roth option, you won’t be able to make catch-up contributions at all.
• Threshold is indexed: The $145,000 income threshold will adjust for inflation in $5,000 increments.

Who Is Affected?

• Those who had FICA wages over $145,000 from your current employer in the previous year.
• Individuals who are age 50 or older and eligible to make catch-up contributions.

If you’re self-employed or don’t receive FICA wages (e.g., partners or sole proprietors), you can still choose pre-tax or Roth catch-ups.

What Should You Do Now?

• Check if your employer offers Roth contributions:
  • If not, they’ll need to amend the plan for you to keep making catch-ups in 2026.
• Review your tax planning strategy:
  • Since Roth contributions are made with after-tax dollars, this change could affect your tax situation, especially if you’ve relied on pre-tax deferrals.
• Speak with a Financial Professional:
  • This is a great time to revisit your retirement savings strategy and determine whether Roth contributions align with your long-term goals. Contact an Oppenheimer Financial Professional today to learn more.
• Plan for higher contributions at age 60–63:
  •  If you're in this age range, you’ll be eligible for a larger catch-up limit, which must also be Roth if you’re a high earner. 

In summary, the Roth-only catch-up rule starting in 2026 is a significant shift for high earners, and one that requires advance planning. If you’re 50 or older and earning $145,000 or more, now is the time to confirm your employer’s plan offers a Roth option, understand how this change impacts your tax strategy, and adjust your savings approach accordingly.

By taking proactive steps today, you can ensure you continue maximizing your retirement contributions without disruption, and position yourself for more tax-efficient income in the future.