A 401(k) rule that took effect Jan. 1 changes how workers 50 and older who earn more than $150,000 make catch-up contributions. Those contributions must now go in as Roth money, meaning no upfront tax deduction.
The test looks backward. Participants must make catch-up contributions on a Roth basis if prior-year wages with the plan sponsor exceeded $150,000 for 2026.
A worker whose 2025 Social Security wages from one employer, shown in Box 3 of the W-2, were $162,000 is covered this year, regardless of what 2026 pay looks like.
How big the catch-up is
The 401(k) limit is $24,500 for 2026, with a standard catch-up of $8,000 for workers 50 and older, or up to $32,500 in total. People who turn 60, 61, 62 or 63 in 2026 can contribute a higher catch-up of $11,250 instead of $8,000.
The Roth requirement applies to the catch-up portion. Regular contributions up to $24,500 can generally still go pre-tax or Roth, depending on what the plan allows.
What the change costs and what it buys
Take an $8,000 catch-up for someone in the 24% federal bracket. Contributed pre-tax, it could cut that person’s income tax by about $1,920 for the year. With a Roth contribution, you lose the deduction, so the same contribution takes a bigger bite out of each paycheck.
The tradeoff is that qualified withdrawals in retirement can be tax-free.
Whether that is a good deal depends on the tax bracket now versus later, how much already sits in pre-tax accounts and how required withdrawals will stack up in the 70s.
Workers with large traditional balances may welcome the shift. Workers who counted on the deduction to stay under an income cutoff may not.
The plan has to offer Roth
Not every employer plan has a Roth option. Under Treasury regulations, a plan that offers catch-up contributions without a Roth option can still allow them for other workers, though not for those over the wage line. So a higher earner in that spot should ask the plan administrator whether a Roth option is being added.
Catch-up contributions must be made before the end of the plan year, which leaves little room to fix a payroll setting in late December.
Where a planner can help
Choosing between Roth and pre-tax means weighing your tax bill now against your tax bill in retirement, and how extra income could push up your Medicare premiums. A planner can help run those numbers. Ask about fees first: a 1% annual fee on $1 million comes to $10,000 a year.
For people with roughly $100,000 to $150,000 or more in investable assets, Advisor.com is one option for getting matched with an advisor. Money Talks News may earn compensation if you use the link.
Check the paystub before Dec. 31
Look for a separate line for catch-up contributions and confirm whether it is labeled Roth. Then compare the year-to-date total with the $8,000 or $11,250 ceiling, and check Box 3 of your 2025 W-2 from the same employer to see which side of the $150,000 line you fall on.
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