New Roth Contribution Catch-Up Rules

February 9, 2026

Beginning in 2026, higher-income employees will face a meaningful change in how catch-up contributions to workplace retirement plans must be handled.

This update, created by the SECURE 2.0 Act of 2022, reflects a broader legislative trend encouraging the use of Roth retirement accounts. While the rule may reduce certain upfront tax benefits for some savers, it also introduces long-term planning opportunities that are worth understanding.

How the new 401(k) catch-up rule works

If you are age 50 or older and your FICA-taxable wages from the prior year exceed $150,000, any catch-up contributions you make to a 401(k) plan must be directed to a Roth 401(k) beginning in 2026.

Because Roth contributions are made with after-tax dollars, these catch-up contributions will no longer reduce your current taxable income. However, Roth accounts can offer meaningful advantages, including tax-free growth and tax-free withdrawals in retirement, provided the plan’s five-year holding requirement is satisfied.

401(k) contribution limits

This requirement is permanent and is determined using the prior year’s W-2 wages from the employer sponsoring the plan. For example, if you earned $150,000 or more in 2025, the Roth-only rule applies to your catch-up contributions in 2026. The same one-year lookback applies in future years.

If your employer’s plan does not offer a Roth 401(k) option, you will not be able to make catch-up contributions at all.

Important: Workers with FICA wages below $150,000 are not affected. They may continue directing catch-up contributions to either traditional or Roth 401(k) accounts, depending on plan availability.

Planning strategies to consider

If this change alters your retirement savings approach, several additional strategies may help offset the loss of a pre-tax catch-up option.

1. Use a Health Savings Account (HSA) strategically

For those enrolled in an HSA-eligible health plan, an HSA can function as a powerful supplemental retirement tool. Contributions are made with pre-tax dollars, investment growth is tax-free, and withdrawals used for qualified medical expenses are also tax-free.

When funded through payroll deductions, HSA contributions avoid FICA and FUTA taxes as well. After age 65, HSA funds may be used for non-medical expenses without penalty, though ordinary income tax applies—similar to traditional IRA withdrawals.

For 2026, HSA contribution limits rise to:

●     $4,400 for individual coverage

●     $8,750 for family coverage

Individuals age 55 or older may add a $1,000 catch-up contribution. Spouses must make catch-up contributions to their own separate HSAs.

2. Maximize standard 401(k) contributions

The annual employee contribution limit increases to $24,500 in 2026 for all savers, regardless of age. This allows you to shelter an additional $1,000 in tax-advantaged savings beyond 2025 levels.

Employer matching or profit-sharing contributions do not count toward your individual limit, though total employee and employer contributions combined are capped at $72,000 for 2026.

3. Explore Roth IRA contributions

If you are seeking additional Roth exposure outside your workplace plan, a Roth IRA may still be an option depending on income.

For 2026:

●     Single filers with MAGI between $153,000 and $168,000 may make partial Roth IRA contributions

●     Married couples filing jointly with MAGI between $242,000 and $252,000 may also qualify for partial contributions

Those above these thresholds cannot contribute directly. Keep in mind that FICA wages and MAGI are calculated differently, so exceeding the $150,000 FICA threshold does not automatically disqualify you from Roth IRA eligibility.

Each Roth account type—Roth IRA and Roth 401(k)—has its own five-year aging requirement for tax-free withdrawals.

4. Use a nondeductible traditional IRA

Even if you are covered by a workplace plan, you can contribute to a traditional IRA on a nondeductible basis.

For 2026:

●     The base contribution limit is $7,500

●     Individuals age 50 and older may add a $1,100 catch-up

While these contributions do not reduce current taxes, the account grows tax-deferred, unlike a taxable brokerage account. These funds may later be converted to a Roth IRA.

5. Consider Roth conversions

A Roth conversion moves assets from a traditional IRA into a Roth IRA. Standard conversions of pre-tax funds are taxable in the year of conversion, while so-called “backdoor” Roth strategies involve nondeductible contributions followed by conversion.

Conversions can be complex, particularly if you hold multiple IRAs with pre-tax balances, as IRS aggregation rules apply. Converted funds also have their own five-year holding period before penalty-free withdrawals.

Bottom Line

While losing a pre-tax catch-up contribution may feel like a setback, thoughtful planning can help reduce the impact and, in some cases, improve long-term tax efficiency. Working with a qualified tax or financial professional can help ensure your retirement strategy remains aligned with your broader goals.

Sources:

https://www.fidelity.com/learning-center/personal-finance/401k-catch-up-contributions-high-earners

Disclosure:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.