Catch-up contributions explained: New Roth rules starting in 2026

Starting in 2026, high earners must make 401(k) catch-up contributions as Roth. Learn what this SECURE 2.0 change means.

• Starting in 2026, high earners age 50+ must make catch-up contributions into a Roth 401(k) account (after-tax).

• “High earner” is defined as earning $145,000 or more in the previous year, at your current employer, as calculated by FICA.

• Savers age 50+ under this income threshold can continue choosing traditional (pre-tax) or Roth (after-tax) for their catch-up contributions.
• Roth contributions, while taxed at the time of contributing, offer tax-free growth and flexibility for future tax planning.
• Preparation is key for a smooth transition.

Catch-up contributions give workers aged 50 and older a way to boost their retirement savings, especially if they couldn’t contribute to a 401(k) as much as they wanted to earlier in their career. 

Starting in 2026, a new rule will change how 401(k) catch-up contributions can be made. Workers aged 50+ earning $145,000 or more in the prior year must make catch-up contributions to a Roth 401(k) (after-tax) rather than a traditional account (pre-tax). The $145,000 income threshold is based on FICA wages, as seen in Box 3 of a W-2, and is based solely on income from their current employer. 

This is a significant shift for anyone age 50+ who contributes to a 401(k), whether it’s sponsored by an employer or a solo 401(k). To get to the bottom of it, we’ll define what catch-up contributions are—and then explore where this new rule comes from, what it means, and how employees and employers can prepare.

What are contribution limits?

Since 401(k)s offer tax advantages, the IRS limits how much you can contribute. Catch-up contributions let workers age 50 or older put extra money into their retirement accounts beyond the standard IRS annual limits.

• In 2025, workers could contribute up to $23,500 to a 401(k) plan.
• Those aged 50 or older can contribute an additional $7,500 as a catch-up, for a total of $31,000.
• Those aged 60-63 can contribute up to $11,250 as a catch-up, for a total of $34,750.

For those interested in saving beyond the 401(k) contribution limits, you can also contribute to an Individual Retirement Account (IRA), as well. 

How the new catch-up contribution rule came about

This rule is part of the SECURE 2.0 Act, a law passed in late 2022 that’s aimed at strengthening retirement savings in the US. The SECURE 2.0 legislation included more than 90 provisions, ranging from automatic enrollment requirements to changes in required minimum distributions (RMDs). Learn more about SECURE 2.0 here. 

Understanding the tax implications of Roth contributions 

Contributions made into a traditional 401(k) account are made with “pre-tax” dollars, meaning you make the contribution first, lowering your taxable income when the government assesses your income tax. When the money is taken out at retirement, it will be taxed (both the money put into the account, as well as any earnings). 

Contributions made into a Roth account are made with “after-tax” dollars, meaning the government assesses your income tax first, then you make your contribution. By requiring higher-income earners to put catch-up contributions into Roth accounts, the IRS collects tax revenue up front. When the money is taken out at retirement, it will not be taxed (neither the money you put in, nor any earnings) as long as the individual is at least 59.5 years old and the account has been held for five years. 

What are the benefits of Roth catch-up contributions?

While some may see the loss of the pre-tax option as a disadvantage, there are also potential upsides to Roth contributions:

• Tax-free growth: Earnings grow tax-free, and qualified withdrawals in retirement are not taxed.
  
  
• Tax diversification: Having both pre-tax and Roth savings gives retirees flexibility to manage taxable income in retirement.
  
  
• Future tax planning: Employees who expect to be in a higher tax bracket in retirement may benefit from paying taxes now.
  
  

These benefits make Roth savings an important tool in long-term retirement planning.

Why the new Roth catch-up rule matters for employees and employers

For those contributing to a 401(k) plan, this rule could change how their retirement savings are taxed. 

For employers offering a 401(k), this rule may require:

• Updates to plan design to ensure a Roth 401(k) option is available.
  
  
• Payroll adjustments to track eligible employees based on income.
  
  
• Employee education to explain the new requirements and the differences between traditional and Roth contributions.

Workers approaching age 50 should keep a few things in mind:

• Start planning now: If you’re a high earner, understand that starting in 2026, catch-up contributions will need to be made into an after-tax Roth account.
  
  
• Adjust expectations: Your take-home pay may look different once Roth contributions get going.
  
  

How Betterment at Work is preparing for the Roth catch-up rule

At Betterment at Work, we’re here to help employers and their teams plan for a secure financial  future.

• Betterment will email those aged 50+ throughout the year, reminding them how to make catch-up contributions in line with the new rule. 
• Workers aged 50+ will also see a reminder about the new rule within their account. 
• In Q1 2027, Betterment at Work will have tools to automatically convert catch-up contributions to a Roth account if they were incorrectly made into a traditional account. 

Employers can read up on SECURE legislation here, and savers can browse additional retirement topics in our financial planning hub.