If you're age 50 or older and saving aggressively for retirement, a major tax rule change is on its way. Starting in 2026, your catch-up contributions, the extra amount you're allowed to save, may have to be designated as Roth.

This shift, driven by the SECURE Act 2.0, means that a portion of your savings that used to give you the option of an upfront tax break (Traditional) will now be an after-tax contribution (Roth). This is a big deal, and you should review your elections now.

The Key Takeaways

• Who is Affected? If you are age 50 or older and earned more than $150,000 in FICA wages in 2025.
• What is Changing? Your catch-up contributions must be Roth (after-tax). You lose the Traditional (pre-tax) option for these dollars.
• Biggest Risk: If your company's plan does not offer a Roth 401(k) feature, you cannot make catch-up contributions.
• Your Action: Check Box 3 (FICA Wages) when you receive your 2025 W-2 and confirm your plan offers a Roth feature.

What is a "Catch-Up" Contribution? (A Quick Refresher)

For savers age 50 and over, the IRS lets you put extra money into your workplace retirement plan, like a 401(k), 403(b), or 457(b), beyond the standard limit. This extra money is called a "catch-up" contribution.

Here are the contribution limits for 2026:

• Standard Employee Limit: The base amount everyone can contribute is $24,500.
• Catch-Up for Age 50-59 & 64+: An additional $8,000, making your total contribution $32,500.
• Catch-Up for Age 60-63 (Super Catch-Up): An additional $11,250, making your total contribution $35,750.

Note: The IRS typically adjusts these limits for inflation annually

Are YOU Affected by the Mandatory Roth Rule?

This rule impacts you if two things are true:

1. You are age 50 or older (or will be by the end of 2026).
2. You are a "High Earner" meaning your 2025 FICA wages from the company sponsoring your retirement plan were more than $150,000.

Here’s a breakdown of how the change affects you based on your 2025 wages:

• If your 2025 wages were $150,000 or less: No change. You still get to choose Traditional (pre-tax) or Roth (after-tax) for your catch-up contributions.
• If your 2025 wages were more than $150,000: Mandatory Roth. Your catch-up dollars must be Roth (after-tax). You lose the option of the upfront tax deduction.

When you get your 2025 W-2 form, look at Box 3 (Social Security wages). That is the number that most plans will use.

Important Nuance: While Box 3 is the standard, your plan may technically use the amount from Box 5 (Medicare wages). If you are close to the $150,000 limit, or if you worked for related companies, confirm with your plan administrator which specific wage amount they use to determine your high-earner status.

The Biggest Risk: Losing Your Catch-Up Option

If you are a high earner (made over $150,000 in 2025), you face a serious problem if your company’s retirement plan does not offer a Roth option.

• The Rule: If you are a high earner, the IRS requires your catch-up contributions to be Roth.
• The Consequence: If your plan doesn't offer a Roth, you are prohibited from making any catch-up contributions at all. Your effective catch-up limit drops to zero.

Action Item: If you think you're affected, check with your plan to see if it offers a Roth 401(k) feature.

How Your Contribution Mix Could Change

Most 401(k) plans use a simple design called "spillover." This means that you set one contribution percentage, and the money keeps flowing until you hit the maximum legal limit.

Here’s a key confusion this new rule creates:

• If you currently split your contributions Traditional (pre-tax) and Roth (after-tax).
• The first $24,500 goes according to the split you chose.
• But once you cross that cap, your additional catch-up dollars are automatically reclassified as 100% Roth if you are a high earner.

The Bottom Line: If you are a high earner, who currently makes some or all Traditional (pre-tax) contributions, your total retirement savings will tilt more toward the Roth (after-tax). This means more taxes due today on those catch-up dollars.

If you currently split your contributions, to keep a similar overall tax mix, you may need to increase the Traditional percentage of your base deferrals (up to $24,500) to offset the mandatory Roth of your catch-up portion.

Action Checklist: Review Your 401(k) Before 2026

The time to check your elections is now. This is not an automatic change; you may need to act.

• Step 1: Check Your Wages. When you receive your 2025 W-2, look at Box 3 (FICA wages). Did you make more than $150,000 at your current company?
• Step 2: Check Your Plan. Confirm with your plan administrator or HR whether your plan offers a Roth 401(k) option. If you are a high earner and they don't, you need to prepare for losing your catch-up ability.
• Step 3: Adjust Your Mix. Review your current Traditional versus Roth split and estimate how much of your 2026 contributions will effectively end up Roth. Make adjustments to your base elections if you want to keep your current tax strategy.  If you currently only make Traditional contributions, plan for the additional tax impact of Roth contributions.‍
• Step 4: Talk to Your Tax Advisor. Discuss how this forced shift to Roth will affect your current tax picture, especially your tax bracket and your expected tax withholding.