Earn Over $150,000? Your 401k Catch-Up Is Roth-Only Starting This Year
A 56-year-old engineer at a large Kansas City employer earned $172,000 in 2025. She has made the extra catch-up contribution to her 401k every year since she turned 50, always pre-tax. In January her paycheck got smaller even though her contribution rate stayed the same. Nothing was wrong with payroll. Starting in 2026, her catch-up dollars have to go in as Roth, which means she pays income tax on them now instead of in retirement.
The rule came from the SECURE 2.0 Act of 2022. The IRS delayed it twice, and January 1, 2026 was the first day plans had to apply it. Most people it affects found out the way she did.
Who the rule applies to
Everyone who is 50 or older by the end of the year can put extra money into a 401k, 403b, or governmental 457b plan on top of the normal limit. That extra amount is the catch-up contribution. For 2026 the normal limit is $24,500, the catch-up is $8,000, and people who turn 60, 61, 62, or 63 during the year get a larger catch-up of $11,250, per IRS Notice 2025-67.
The Roth requirement applies to you in 2026 if your 2025 Social Security wages from the employer that sponsors your plan were more than $150,000. That wage figure is in Box 3 of your 2025 W-2. It is not the same number as Box 1, your taxable wages. Pre-tax 401k deferrals reduce Box 1 but not Box 3, so someone earning $160,000 who deferred $31,000 pre-tax can see $129,000 in Box 1 and still be over the line. Health insurance premiums and HSA contributions taken out through a cafeteria plan reduce both boxes, so they can keep someone near the line just under it.
Three details decide when it's an unusual case. The test looks only at wages from the employer that sponsors the plan, so if you changed jobs this year, last year's pay from your old employer does not count at the new one. Partners and sole proprietors who have only self-employment income, and no W-2 wages from the plan sponsor, are outside the rule. And a large 2025 bonus or a vesting of restricted stock counts as wages, so a one-time spike last year can put you under the rule this year even if your salary alone would not.
What it costs in take-home pay
The amount you can save does not change, but when you pay the tax does! A pre-tax catch-up lowers your taxable income this year. A Roth catch-up does not, but the money and its growth come out tax-free later, as long as you are 59½ and the Roth account has been open at least five years.
For the engineer above, in the 24 percent federal bracket and paying Kansas tax at 5.58 percent on income above $46,000 for married couples, an $8,000 Roth catch-up costs about $1,920 in federal tax and $446 in Kansas tax this year that a pre-tax contribution would have avoided. Spread across 26 paychecks, that is about $91 less take-home pay every two weeks. At 60 through 63, the $11,250 catch-up raises the difference to about $3,328 a year. Missouri residents pay a top rate of 4.70 percent, so the state piece is a little smaller on that side of State Line Road.
Some people respond to the smaller paycheck by dropping the catch-up. That gives up the contribution entirely, along with the tax-free growth that comes with it, to avoid a tax bill that has only moved to an earlier year.
Whether paying the tax now is a bad trade
Is paying the tax now a bad idea? Like so many things in financial planning, the answer depends on your tax rate in retirement compared with your rate today. If you pay 24 percent now and would have paid 24 percent on the withdrawal later, Roth and pre-tax come out the same. If your retirement rate will be lower, the old pre-tax treatment was better. If it will be higher, Roth is better.
Many households earning over $150,000 assume their rate will drop in retirement. For a lot of them it does not drop as far as expected. Required minimum distributions from large pre-tax balances, Social Security that becomes up to 85 percent taxable, pensions, and a surviving spouse who moves from joint to single brackets can all push retirement income into the same bracket the couple had while working. Roth money helps with each of those. Since 2024, Roth balances inside a 401k are no longer subject to required minimum distributions during your lifetime, per the IRS distribution rules, and Roth withdrawals do not count toward the income Medicare uses to set its surcharges.
For someone who already holds most of their savings in pre-tax accounts, a few years of required Roth contributions can leave them with a better mix than they would have chosen on their own.
Four things to check before the year ends
First, confirm your plan offers Roth contributions at all. A plan without a Roth option cannot accept catch-up contributions from anyone subject to the rule, so the extra $8,000 or $11,250 simply is not available. If your employer's plan lacks Roth, that is worth raising with HR.
Second, look at a recent pay stub and confirm how your catch-up is being coded. The final regulations let plans treat the catch-up as Roth automatically once you hit the $24,500 limit, which is called a deemed election, or require you to make a separate Roth catch-up election. If your plan uses a separate election and you never made one, your catch-up may have stopped, which is easy to miss.
Third, if you are turning 60 this year, check that your plan is using the higher $11,250 limit. The larger catch-up is optional for employers to offer, and the age test is your age at the end of the calendar year.
Fourth, look at your 2026 Box 3 wages before December. They determine whether the rule applies to you in 2027. The IRS adjusts the $150,000 threshold for inflation each fall and rounds down to the nearest $5,000, so the 2027 number should be announced alongside the other 2027 limits.
The final regulations generally take full effect in 2027, but they do not delay the rule itself. For 2026, plans are held to a reasonable, good-faith reading of the law, which gives employers room on the mechanics without giving participants an exemption.
How this fits with the rest of your plan
The catch-up is one lever among several. If the Roth catch-up is now your only after-tax contribution, the pre-tax side of your 401k, any HSA, and the timing of Roth conversions in your early retirement years all work together on the same question of which tax rate you pay. We walked through how those pieces fit for employees at one large local employer in Are You Getting the Most From Your Garmin Benefits?, and the case for planned conversions in Tax Strategy Is a Year-Round Game. For employee-owners whose 401k sits next to an ESOP, the rule applies to the 401k side only, as we noted in our Burns & McDonnell guide.
The calculator below checks whether the rule applies to you, what it changes in take-home pay this year, and how the Roth catch-up compares with the old pre-tax treatment at your expected retirement tax rate.
2026 Plan Year
Does the Roth catch-up rule apply to you, and what does it cost?
Check whether your 2026 catch-up has to be Roth, see the effect on take-home pay, and compare it with the old pre-tax treatment at your expected retirement tax rate.
How this works: for 2026 the age 50 catch-up is $8,000 and the age 60 to 63 catch-up is $11,250. The catch-up must be Roth if your 2025 Social Security wages from the plan sponsor exceeded $150,000. The comparison holds take-home pay equal: it asks what the same reduction in this year's take-home pay buys in retirement under each treatment, using flat tax rates. It excludes Social Security taxation, Medicare surcharges, required distributions, the five-year Roth holding rule, and changes in tax law. Figures are estimates for illustration.
Sources: IRS Notice 2025-67 (2026 limits and the $150,000 threshold); Treasury final regulations on catch-up contributions, September 2025.
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