From Fox Business: A popular tax break for workers nearing retirement age to make extra catch-up contributions is changing next year, which will limit access to some high earners.
The IRS issued new regulations last month to implement a provision of a 2022 law known as the SECURE 2.0 Act, which requires that high earners who earned $145,000 or more in gross income as an individual the prior year make 401(k) catch-up contributions to after-tax Roth accounts starting with the 2026 tax year.
Under the rules that will remain in effect through the 2025 tax year, workers aged 50 and up were eligible to make their 401(k) catch-up contributions to either a before-tax traditional account or an after-tax Roth account, depending on their preference and what their retirement plan allows.
Starting in 2026, high earners will no longer be able to make before-tax catch-up contributions to 401(k) plans, losing the upfront tax deduction previously available for these additional retirement savings. In 2025, workers over 50 can add an extra $7,500 in 401(k) catch-up contributions beyond the $23,500 standard limit, while those aged 60 to 63 can contribute up to $11,250 extra.
Workers without access to a Roth 401(k) may be unable to make catch-up contributions until their employer offers one. Employers are rapidly adopting the option—now included in 95% of Fidelity plans and 86% of Vanguard plans, up sharply from two years ago.
Traditional 401(k) contributions offer an upfront tax break but are taxed upon withdrawal, whereas Roth contributions are taxed upfront and allow for tax-free growth and withdrawals.
