Thanks to a provision in the Secure 2.0 retirement legislation, high-income earners (with $150,000 or more in FICA income in the prior year) who are over 50 and investing in 401(k) or other company retirement plans must make catch-up contributions to their plans' Roth option, rather than traditional tax-deferred contributions, starting this year.
This limit was amended under the SECURE 2.0 Act of 2022, and the the annual cost-of-living adjustment will rise to $1,100 in 2026, up $100 from this year's figure. The catch-up contribution limit that applies to most of the 50-and-older worker population will also go up by $500 next year to a cap of $8,000. A higher catch-up limit of $11,250 applies to workers ages 60-63. The IRS clarified that any plan participants who are at least 50 will generally be able to contribute as much as $32,500 per year starting in 2026.
Higher-income workers who earn more than $145,000 must now put their catch-up contributions into a Roth 401(k), meaning that they'll pay taxes now rather than later in retirement. The rules generally apply to contributions beginning in 2027, but some plans can implement them earlier. The $145,000 income threshold is based on prior-year wages and applies separately at each employer. New hires and self-employed workers without W-2 wages are exempt.
The Roth catch-up change stems from Section 603 of the SECURE 2.0 Act of 2022, which requires age‑50+ catch-up contributions made by higher earners to be designated as Roth (after‑tax) rather than pre‑tax, with the intent of raising near‑term federal revenue while preserving catch‑up access and boosting tax‑free retirement balances over time. The change reflects a bipartisan legislative compromise to fund SECURE 2.0's broader retirement enhancements by accelerating tax revenue via Roth treatment for high earners' catch‑ups.