--- title: Say Goodbye to a Big Tax Advantage for Older, High-Income Workers description: The IRS and Department of Treasury finalized rules earlier this month that put new restrictions on catch-up contributions for 401(k) plans. authors: - name: Kaitlin Mulhere role: Editor url: https://money.com/author/kaitlin-mulhere/ bio: Kaitlin Mulhere is an editor at Money.com. Since joining in 2015, she’s written and edited about a variety of personal finance topics, including banks, credit, student debt, saving strategies and more. education: University of Florida at_money_since: 2015 articles: 217 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Shopping - Taxes social: - https://twitter.com/KMulhere - https://www.linkedin.com/in/kaitlin-mulhere-64503048/ editors: - name: Katherine Peach role: Associate Editor url: https://money.com/author/katherine-peach/ bio: Katherine Peach is an associate editor with a focus on news and email at Money. She didn’t always intend to write about money. She’s a classically trained pianist who dreamed of becoming an archaeologist. However, in 2007 Katherine began working in financial publishing as an editor for Agora Inc. (Apparently, unearthing ideas about improving your personal finances isn’t such a bad career alternative!) Katherine’s writing and editing work has been featured in Investing Daily, Clever, Investor Junkie, The Palm Beach Letter, Truth & Plenty, Independence Monthly, NICHE, AmericanStyle, AntiqueWeek, Millennial Money, Money Done Right, TheStreet, Sure Dividend and many others. Katherine holds a Bachelor of Arts in Ancient Studies with concentrations in Archaeology and Ancient Languages and a minor in Literature from the University of Maryland, Baltimore County. She is a member of Phi Beta Kappa. education: University of Maryland, Baltimore County at_money_since: 2025 articles: 14 covers: - Retirement - Banking - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Federal Reserve Rate Cuts - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes published: '2025-10-15T14:13:38.000Z' section: Retirement tags: - News word_count: 914 canonical: https://money.com/retirement-catch-up-tax-change/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![A stack of blocks representing 401k perks is being manipulated](https://img.money.com/2025/09/News-401k-Lose-Major-Perk-2026.jpg?crop=0px%2C132px%2C2880px%2C1620px&quality=85) Older workers trying to stash away as much money as possible before retiring are losing a key tax break in 2026. The IRS and Department of the Treasury finalized rules earlier this month that put new restrictions on catch-up contributions for 401(k) plans, which allow workers aged 50 and over to save extra before leaving the labor market. Starting next year, workers earning more than $145,000 will have to use after-tax dollars for catch-up contributions. That’s a departure from current rules, which allow savers of all income levels to use pre-tax dollars for catch-up contributions. The change is part of the Secure 2.0 Act of 2022, a [sweeping law](https://money.com/retirement-saving-changes-secure-act/) that has overhauled [retirement saving rules](https://money.com/retirement-changes-2025-secure-act/) over the past few years. ## If you currently have a 401k but are looking for different ways to extend your portfolio, rolling over to a Gold IRA is one of the best ways to do so! ### American Hartford Gold can help protect your assets in tax-advantaged accounts by providing metal IRA. Why wait? Select your state to get started today! [Invest in Gold](https://money.com/pr/b8ee44549da3?ap_referrer=%2Fretirement-catch-up-tax-change%2F) ## How much can workers put in a 401(k)? This year, workers 49 and younger can contribute $23,500 a year to their 401(k)s, not including employer matching. Workers who are closer to retirement, though, have higher limits: Those aged 50 to 59 can make an extra $7,500 in catch-up contributions, and workers who are 60 to 63 are allowed a [“super” catch-up contribution](https://money.com/401k-contribution-limits-2025-irs/) that raises the extra amount to $11,250, for a total of $34,750. The new “super” limit was also part of the Secure 2.0 and took effect this year. These limits apply to 403(b) and 457(b) plans as well. The maximum contribution allowed doesn’t increase every year, but annual bump-ups to account for inflation are common. The IRS has not announced the annual limit for 2026 yet, but based on the latest inflation data, consulting firm Milliman [predicts](https://us.milliman.com/en/insight/2026-irs-limits-forecast-august) the general limit could increase by $1,000 to $24,500. Milliman expects the catch-up limit for workers in their 50s to rise by $500, while the super catch-up limit will hold steady. (Other [forecasts](https://www.mercer.com/insights/law-and-policy/mercer-projects-2026-retirement-plan-limits/) call for increases to all three limits.) ## How are the catch-up contribution rules changing? Workers saving money in most retirement accounts have two broad options: contributing with pre-tax dollars, where you don't pay taxes on the money until you withdraw it or loading your account with post-tax dollars. With the second option, also called a Roth account, you pay the taxes when you contribute, so you don't owe anything when you retire. Individual retirement accounts, or IRAs, use pre-tax dollars, while Roth IRAs use post-tax earnings. But 401(k) plans can be set up either way, and most employers now offer both options. Under the new regulations, workers earning more than $145,000 can still contribute up to the general limit in pre-tax dollars. Any catch-up contributions will then have to be Roth contributions and taxed upfront. The change was originally supposed to go into effect in 2024, but the IRS delayed the rule, due in part to requests from employers and plan sponsors who said they needed time to prepare for the change. Now plans have to begin implementing the change by Jan. 1, 2026, but the IRS language says plans have until Jan. 1, 2027, to be fully compliant. That gives employers some flexibility next year. The $145,000 income limit is indexed to inflation, so it's likely to rise in the future. For the high earners who are affected, the change essentially means they'll have to pay more in taxes during their highest earning years instead of being able to shift the tax responsibility to after they've retired. Higher-earning workers whose employers don’t offer a Roth 401(k) may lose access to catch-up contributions altogether. Still, it's worth noting that only a small portion of savers will likely be affected. Within plans managed by Fidelity, for example, just 8.6% of all savers last year hit the maximum contribution that's required before they can even start catch-up contributions, according to Michael Shamrell, vice president of workplace thought leadership at Fidelity. ## What should older savers do now? Workers still have a few months to try to max out their accounts under the existing rules. After this year, older, higher-earning workers hit with the new mandatory Roth treatment of catch-up contributions will owe more in taxes than they would have previously (assuming all their other credits and deductions are the same). But that doesn't mean the catch-up contributions aren't worth it, Shamrell says. "At the end of the day, you want to get as much savings set aside as possible," he says. "The fact that you’re contributing, that’s the biggest and most important step.” Generally speaking, financial experts recommend that people prioritize Roth contributions when their earnings are lower and then shift more of their focus to pre-tax contributions as they earn more and move into a higher tax bracket. But even though it may be too late to adopt that strategy for today's pre-retirees, there is a silver lining to the new rules. While the precise ideal breakdown is based on individual factors, a plan that calls for having your savings split between pre- and post-tax dollars allows you the best of both worlds. You can take advantage of both lowering your taxable income while working and having access to money that doesn't get taxed when you're living on a fixed income. 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