Starting January 1, 2026, the rules for 401(k) catch-up contributions are changing dramatically for anyone who earned more than $145,000 (indexed; $150,000 in 2026) in FICA wages from one employer the prior year.
The big game-changer ahead? Roth catch-up contributions, beginning in 2026 under the SECURE 2.0 Act. If you’re over 50 and earning a good income, this rule could transform how you grow your savings—possibly allowing you to put extra money into after-tax Roth accounts for tax-free growth later.
Don’t be caught off guard by these changes. You can schedule a call with an ARQ Wealth advisor to help you determine the best strategy for you by calling (480) 214-9572.
Understanding Catch-Up Contributions: The Basics
The tax code allows catch-up contributions to increase retirement savings if you’re aged 50 or older. If you turn 50 or above by the end of the tax year, you can contribute additional funds beyond the usual annual limits to plans like 401(k)s, 403(b)s, and governmental 457(b)s. These are important tools to help grow wealth faster, especially if you didn’t save enough earlier in your career.
Historically, catch-ups have been a flexible benefit. You could assign them as pre-tax (reducing your current taxable income) or Roth (after-tax, with tax-free qualified withdrawals later). However, starting in 2026, that flexibility will be limited for higher earners.
IRS Increases Contribution Limits for 2026
The IRS increased limits across the board for 2026, giving everyone—including high earners—a larger allowance for catch-up contributions.
For 401(k) catch-up contributions, the standard $8,000 increase applies to most people aged 50 and older, but the “super catch-up” limit for ages 60-63—another benefit from SECURE 2.0—remains at $11,250.
Consider a 61-year-old who wants to max out their contributions. He can contribute $35,750 directly into his plan, with the catch-up amount growing tax-free if Roth-designated. IRAs also receive a modest COLA increase, but remember, IRA catch-up contributions aren’t subject to the Roth mandate—they remain flexible.
These hikes reflect inflation adjustments, ensuring your dollars keep up with rising costs. But for high earners, the Roth requirement adds an extra layer: You’ll pay taxes upfront on those catch-up contributions, but qualified withdrawals (after age 59½ and a five-year holding period) won’t be taxed at all. It’s a gamble on future tax rates—if you think they’ll go up, Roth could be a wise choice.
2026 Contribution Limits: More Room to Save
Here’s how the key plans break down:
| Plan Type | Standard Limit (Under 50) | Catch-Up (Age 50+) | Super Catch-Up (Ages 60-63) | Total (Age 50+) | Total (Ages 60-63) |
| 401(k)/403(b)/457(b) | $24,500 | $8,000 | $11,250 | $32,500 | $35,750 |
| SIMPLE IRA | $17,000 ($18,100 if eligible) | $4,000 ($3,850 if eligible) | $5,250 | $22,100 | $23,350 |
| Traditional/Roth IRA | $7,500 | $1,100 | N/A | $8,600 | $8,600 |
Source: IRS Notice 2025-67
Employer matches and profit-sharing still flow in pre-tax, even if your catch-up is Roth.
The New Roth Catch-Up Mandate—Explained in Plain English
The IRS has confirmed that starting January 1, 2026, catch-up contributions must be made on a Roth basis if your FICA wages from the previous year exceeded $150,000. This change, introduced by Section 603 of SECURE 2.0, aims to promote tax-free growth while simplifying plan administration.
Why does this matter as tax season approaches?
Contributions for 2026 can start as early as January, but you need to adjust your payroll elections now to avoid surprises.
Additionally, understanding your FICA wages—your Social Security and Medicare taxable income from Box 3 on your W-2—is crucial for determining your options.
If you’re under the $150,000 threshold for 2025, you’re in the clear: continue choosing pre-tax or Roth contributions as you prefer. However, if you’re above it, prepare for Roth-only catch-ups.
With these changes, eligible taxpayers will:
- still get to make the catch-up (great news).
- lose the upfront tax deduction on that portion (not-so-great if you’re in a high bracket today).
- still enjoy 100% tax-free future growth and qualified withdrawals on that money (potentially huge if tax rates rise or you’re in a higher bracket in retirement).
Important: Your regular $24,500 deferral can still be pre-tax, Roth, or a blend. Only the catch-up contribution is required for high earners to go into a Roth.
Many 401(k) plans were not ready for this rule when it was initially scheduled for 2024. Congress granted a two-year delay, and the IRS issued Notice 2024-80, giving administrators until 2026 to comply.
Real-Life Impact: Three Common Scenarios
Sarah, Corporate VP, $220,000 W-2. In 2026, she wants to contribute the full $32,500. The first $24,500 can still be pre-tax, but her $8,000 catch-up must be Roth. She’ll owe roughly $2,600–$3,200 in extra federal tax in 2026 (depending on her bracket and state), but that money will grow tax-free forever.
Mike & Lisa, Married S-Corp Owners, Combined $400k Profit. They intentionally set their 2025 salaries at $140,000 each. Because neither spouse exceeds the $150,000 FICA-wage threshold, both can still make pre-tax catch-ups in 2026 while taking the rest of the profits as distributions, resulting in the same total savings on the employee side. On the employer side, lower FICA wages reduce what the employer (the same people in this example) can contribute, meaning they won’t be able to max out the 401(k).
Raj, Tech Employee Turning 60 in 2026, $180k W-2. He can put away $35,750 total ($24,500 regular + $11,250 super catch-up). Every dollar above $24,500 must be Roth. That’s an extra ~$4,000 in immediate tax, but he locks in decades of tax-free growth right when his balance is largest.
Pros and Cons of Roth Catch-Ups
Roth catch-up contributions for 2026 aren’t just mandates and headaches; they offer the potential for real benefits, especially for long-term planners.
Pros:
- Tax-Free Growth and Withdrawals: Pay now, retire tax-free. It is ideal if you expect to be in a higher bracket later.
- No RMDs (Sort Of): Roth 401(k)s now follow Roth IRAs—no required minimum distributions during your lifetime, preserving more for heirs.
- Diversification: Mixing pre-tax regular contributions ($24,500 max) with Roth catch-ups hedges against tax uncertainty.
- Super Catch-Up Boost: Ages 60-63 get that $11,250 Roth infusion, potentially compounding tax-free for decades.
Cons:
- Upfront Tax Hit: No immediate deduction means higher 2026 taxes—which can hurt if cash flow is tight.
- Plan Limitations: If your employer skips the Roth provision, you’re sidelined from catch-ups entirely.
- Income Phase-Outs Elsewhere: Roth IRAs have their own MAGI limits ($153,000-$168,000 for singles in 2026), so this doesn’t unlock those.
Bottom line: If you expect your effective tax rate to rise, Roth catch-ups are the way to go. Run the numbers: An $8,000 Roth catch-up at a 24% bracket costs $1,920 now but saves big on future gains.
Special Considerations for S-Corp Owners: Unlocking Flexibility
S-corp owners pay attention—this is where the Roth mandate aligns with strategic planning. Unlike W-2 employees, who are paid a fixed salary, you manage your compensation: W-2 wages (subject to FICA) and K-1 distributions (pass-through, FICA-free). Catch-up contributions, including Roth, hinge solely on those FICA wages—distributions do not count as “earned income” for retirement purposes.
Here’s the flexibility tip: To avoid the Roth requirement, keep your 2025 FICA wages below $150,000. Pay yourself, for example, $149,999 in salary—enough for substantial contributions (up to 25% employer match on wages, plus deferrals)—and take the rest as distributions.
This maintains pre-tax catch-ups in 2026 while reducing overall self-employment taxes. For instance, a $140,000 salary allows you to defer $24,500 on the employee side (pre-tax or Roth) plus $35,000 in employer profit-sharing, totaling $59,500 before catch-ups—then add $8,000 pre-tax if under the limit.
But beware: The IRS demands “reasonable compensation.” If you pay yourself too little, they could reclassify distributions as wages, triggering audits and penalties. Aim for market-rate pay based on your role. In other words, pay yourself only what you would have to pay someone else to do your job. Consult a CPA to document it.
Solo 401(k)s shine here: They allow both pre-tax and Roth deferrals, loans, and no employee-matching hassles if you’re owner-only.
For S-corps eyeing maximum savings, blend a Solo 401(k) with a Roth IRA (if eligible) or even a cash balance plan for ultra-high earners. The key? Wages drive everything—tune them to hit your Roth vs. pre-tax sweet spot.
Planning Ahead: Action Steps for Tax Season
With contributions for 2026 about to begin, now is the time to act. Review your 2025 pay stubs to check FICA totals. Log in to your plan portal to update elections—many plans allow changes mid-year.
Employers should work with payroll and recordkeepers to help ensure seamless Roth defaults.
Consider a tax projection: Tools like those used by financial advisors can model Roth vs. pre-tax scenarios. And don’t forget to consider alternatives, such as backdoor Roth conversions or HSAs, for tax diversification.
The Roth catch-up shift is a nudge toward future-proofing your savings. Embrace it with eyes wide open, and 2026 could be your most productive saving year yet.
You Don’t Need to Go It Alone
Don’t make the potentially costly mistake of trying to navigate these changes alone—we recommend seeking the perspective of a fiduciary advisor for complex rules like Roth catch-up contributions.
Contact an ARQ Wealth financial advisor today to tailor a plan designed to maximize your 401(k) catch-up contributions and minimize tax pitfalls. Schedule a consultation today.