If you’re under 50, this post might not apply to you — but feel free to share it with a family member or co-worker who’s approaching retirement.
For 2025, the maximum 401(k) contribution limit is $23,000. Once you turn 50, you can make an additional $7,500 in “catch-up” contributions — bringing your total potential savings to $30,500. Looking ahead, the projected 2026 limits rise to $24,500 + $8,000 in catch-ups.
However, there’s a key change under the SECURE Act 2.0: If your prior-year income exceeds $145,000, your catch-up contributions must be made as Roth (after-tax) rather than pre-tax.
The $145,000 threshold is based on FICA wages, not AGI, and it is determined per individual, even if you file married jointly.
Example:
Mary, age 56, earns $200,000 in 2025 and contributes the full $30,500 to her 401(k), including the $7,500 catch-up. In 2026, with limits rising to $24,500 + $8,000, Mary must direct her catch-up into a Roth 401(k). This means she’ll no longer receive the upfront tax deduction on that portion, but those funds will now grow tax-free and can be withdrawn tax-free in retirement.
Key Takeaway:
This new rule changes the tax strategy around retirement saving for high earners age 50 and above. Make sure to review your plan and contribution elections with your financial advisor or CPA to ensure they align with your long-term retirement strategy.
Want to talk more? Contact Cole Nicholson | 952-277-9222
This is a hypothetical example and is not representative of any specific investment. Your results may vary. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.