High-income workers ages 50 and above are about to face a significant change in how they can boost retirement savings through their 401(k) plans. The Wall Street Journal reports that, starting in 2026, individuals earning more than $145,000, based on one's wages the prior year, will be required to make their extra "catch-up" contributions on an after-tax basis, according to new IRS rules clarifying a 2022 law.
Traditionally, workers 50 and older have been able to make additional pretax contributions—$7,500 above the basic $23,500 limit for 2025, or $11,250 for those ages 60 to 63. Going forward, high earners will have to funnel those extra dollars into Roth accounts, meaning they'll pay taxes up front but can withdraw funds tax-free during retirement. The move marks the first time Roth contributions have been mandated by the tax code.
The change could sting for those used to up-front deductions. For example, a 60-year-old in the 35% tax bracket could lose almost $4,000 in deductions on an $11,250 catch-up, potentially bumping their adjusted gross income high enough to phase out other tax breaks or push them into a higher tax bracket altogether. There's another catch: Not all 401(k) plans offer a Roth option, though most large providers now do. High earners whose plans don't could be locked out of catch-up contributions entirely until their employer updates the plan.
story continues below
Still, although Quartz acknowledges the "short-term pain" for some earners who are looking to increase their current savings, the outlet notes a silver lining: Gains on Roth investments won't be hit with a tax bill, meaning account owners will be able to enjoy that money free and clear in their senior years. "They'll have a tax-free retirement income stream," a Long Island CPA tells the Journal. The new guidelines will also prove beneficial to the US government, notes Investopedia, as it can collect taxes from people in the near term rather than having to wait for them to make withdrawals later. "This makes [the government] a lot of money," one tax attorney tells the outlet.
,
uBlock 
,
and
Ghostery 
)
