Navigating New 401(k) Catch-Up Contribution Rules

For many Americans, the 401(k) is one of the most accessible ways to build long-term retirement savings. And for workers age 50 and over, catch-up contributions have been a game-changer – allowing for additional savings during your peak earning years.

But starting in 2026, a significant rule change will reshape how high earners use catch-up contributions. Understanding what’s changing, who may be affected, and how to prepare can help you adjust your long-term planning.

2026 401(K) contribution limits

Starting in 2026, the standard employee 401(k) contribution limit will be $24,500, with an additional $8,000 catch-up contribution available for anyone age 50 or older, bringing the total possible annual contribution to $32,500. For those in the catch-up age range, that extra $8,000 each year may help accelerate retirement readiness, especially when compounded over the next 10–15 years.

What catch-up contributions are (and why they matter)

Catch-up contributions allow workers age 50+ to contribute an extra $8,000 each year – above the standard $24,500 limit.

This might be especially beneficial for:

• People who started saving later
• High earners aiming for greater tax-advantaged saving
• Anyone accelerating retirement readiness as retirement approaches

Historically, catch-up contributions were made pre-tax, reducing taxable income in the contribution year. For example, if someone in a 35% tax bracket contributed $8,000 in catch-up dollars, it could reduce taxes by approximately $2,800 for that year. Actual outcomes depend on individual circumstances.

What’s changing in 2026

If you earned more than $145,000 (indexed) in the prior calendar year from your employer, your catch-up contributions will have to be made on a Roth basis. A few clarifications help frame this correctly: the $145,000 threshold applies per employee—not per household—so your spouse’s income and your joint filing status are irrelevant. Only your own prior-year FICA wages from that employer count. For high earners, this rule shifts catch-up contributions from pre-tax to Roth, meaning there’s no upfront deduction, you’ll pay taxes now during peak earning years, and those dollars have the potential to grow and may be withdrawn tax-free in retirement. In effect, it functions like a mandated Roth conversion of your catch-up contributions.

Will every plan allow Roth catch-up contributions?
This is where things get interesting. Under the new rule, if a retirement plan does not offer a Roth option, no one in that plan can make catch-up contributions—regardless of income. That means employers must add a Roth feature before 2026 to remain compliant and keep catch-ups available to employees. In practice, most mid-size and large employers are already updating their plans, while smaller businesses may move more slowly, though industry pressure is strong. The IRS even delayed implementation to 2026 because many plans weren’t Roth-ready.

The bottom line: most workers will still have access to catch-up contributions, but a small subset may temporarily lose that option if their employer hasn’t added a Roth feature in time.

What this means for high earners

For anyone making more than $145,000 with a 401(k):

• Your catch-up must be Roth starting in 2026
• You lose the immediate tax deduction
• Your taxable income may increase slightly
• Your retirement withdrawals from the Roth will be tax-free if IRS requirements are met.

This doesn’t eliminate the value of catch-up contributions; it just shifts how the benefit shows up.

Consider these planning strategies under the new rules

1. Rebalance Your Pre-Tax vs. Roth Mix

Since the $8,000 catch-up must be Roth for high earners, some savers may benefit from:

• Using pre-tax dollars for the first $24,500
• Applying Roth treatment to the required $8,000 catch-up

This approach may help manage current taxable income with the goal of building Roth assets for retirement.

2. Consider Roth Conversions on your terms

Because Roth dollars will now be part of your plan:

• Would converting some IRA or 401(k) assets during lower-income years be helpful?
• Would gradual conversions reduce the risk of moving into higher tax brackets?
• Could early-retirement conversions help reduce future Required Minimum Distributions (RMDs)?

Evaluating these questions may give you more control over future tax outcomes.

3. Build Tax Diversification Outside the 401(k)

For high earners, it might be helpful to diversify into:

• HSAs (when eligible)
• Taxable brokerage accounts (long-term capital gains flexibility)
• Real estate (depreciation + asset growth)
• Deferred compensation plans (if available)

Different “tax buckets” may offer more flexibility when planning future withdrawals.

4. Double-check your employer match strategy

Employer match rules are not changing, but contribution timing still matters. Consider reviewing:

• Whether contributions are spread evenly throughout the year
• Whether front-loading may unintentionally reduce match dollars
• Whether you are contributing enough to receive the full match available

Capturing employer contributions remains a foundational building block of most retirement strategies.

Tax planning considerations

Because high earners will lose the pre-tax deduction on catch-up dollars:

• Additional deductions or credit opportunities
• Timing of bonuses or equity income
• RSU withholding patterns
• Charitable giving strategies, such as donor-advised funds

Tax planning can become an important consideration when rules change.

Long-term retirement planning still matters most

Rules change, tax laws shift, and what works today may look different tomorrow. Even so, many households maintain a mix of pre-tax, Roth, and taxable savings to support flexibility across different tax environments. Certain approaches may also help manage future Required Minimum Distributions (RMDs), depending on individual circumstances. The 2026 rule doesn’t derail good planning. Instead, it just resets the playbook.

About the Author: Katy McDonald, CFP®, is a Lead Advisor at Brighton Jones. She helps high-income professionals and families design tax-efficient investment strategies and retirement plans aligned with their values and long-term goals.

Disclosure: This content is for informational and educational purposes only and should not be construed as individualized advice. For individualized advice tailored to your specific circumstances, please consult with your adviser. Brighton Jones, its affiliates, and employees do not provide personalized investment, financial, tax, or legal advice through this communication.