Key Takeaways
- Rule Change Hits in 2026: High earners making $145,000 or more will lose the ability to make pre-tax 401(k) catch-up contributions.
- More Taxes, Less Flexibility: All additional contributions must now go into Roth accounts, meaning taxes are paid upfront instead of deferred.
- Critics Say It’s a Cash Grab: Analysts warn the change favors Washington’s appetite for revenue over long-term financial independence for American savers.
The IRS is tightening the reins on retirement savings for America’s top earners and it could mean a higher tax bill for millions.
Starting in 2026, workers making $145,000 or more will no longer be able to make pre-tax catch-up contributions to their 401(k)s. Instead, the extra savings will be required to go into Roth accounts under new rules tied to the SECURE 2.0 Act.
For decades, workers over 50 could choose between traditional 401(k)s — which offered immediate tax deductions — and Roth options, which grow tax-free. But under the IRS’s new guidance, high earners lose that flexibility. Their catch-up contributions will now be taxed upfront before entering their retirement accounts.
The move is expected to hit upper-income savers who used the deduction to offset taxable income late in their careers. Critics say it’s another Washington cash grab disguised as reform — trading long-term savings stability for short-term tax revenue.
In 2025, workers 50 and older can still contribute an extra $7,500, while those aged 60 to 63 can contribute up to $11,250. But for employees whose plans don’t yet offer Roth options, the change could mean losing access to catch-up contributions altogether.
Fidelity reports that 95% of its managed plans now include Roth options, up from 73% two years ago, as companies race to comply.
Once again, Washington’s rulemakers are squeezing success — and proving that when government “helps” retirement savers, it usually costs them more.