Every year brings incremental changes to retirement plans, but 2026 is different. This isn’t just about higher contribution limits. It’s about a fundamental shift in how catch-up contributions are taxed — one that will directly affect higher-income workers and quietly reshape retirement planning.
Start with the headline numbers. In 2026, the employee 401(k) contribution limit rises to $24,500. Catch-up contributions for those age 50 and older increase to $8,000, and participants ages 60 to 63 can still make a larger “special” catch-up of $11,250. On paper, that’s a win for retirement savers.
But here’s the catch — and it’s a big one.
If you earned more than $145,000 in the prior year, all catch-up contributions must be made on a Roth basis. No pre-tax option. No deferral of income taxes until retirement. That’s a significant departure from how higher earners have historically used catch-ups as part of their tax-planning strategy.
This change isn’t accidental. Shifting catch-up contributions to Roth means the government collects taxes now instead of later. For participants in their peak earning years, that can mean paying tax at a higher marginal rate than they might have faced in retirement.
That said, this isn’t automatically bad policy — just different policy.
Roth contributions grow tax-free, qualified withdrawals aren’t taxed, and Roth accounts aren’t subject to required minimum distributions. For some participants, especially those who expect higher taxes later or want flexibility in retirement income planning, this could actually be a long-term advantage.
The real risk is complacency.
Participants need to confirm whether their employer’s plan even offers a Roth option. If it doesn’t, higher-income employees may lose the ability to make catch-up contributions altogether. Plan sponsors need to understand that this is no longer a participant-level issue — it’s a plan-design and operational issue.
2026 isn’t just another compliance year. It’s the year retirement savings became more complicated — and more strategic.
If you’re not reviewing this now, you’re already late.