Question: I'm 52, make $210K a year and heard I may lose a 401(k) tax break in 2026. Should I still max out my 401(k) as I had planned?
Answer: The more money you're able to sock away in your 401(k), the more financial flexibility you might enjoy in retirement. And whether you're on track with your savings or trying to make up for lost time, you may be eager to take advantage of your plan's catch-up contributions, which are available to savers ages 50 and over.
If you’re 52 years old and earning $210,000 a year, you may be in a strong position to max out your 401(k) at the catch-up level. This year, 52-year-olds (and anyone aged 50 and older) can contribute up to $31,000 to a 401(k), and that number is likely to rise in 2026 in line with inflation.
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But there’s a new rule that will apply to 401(k) catch-ups for higher earners, taking effect in 2026. And it’s a change that may leave you rethinking your plan to max out your contributions.
Higher earners lose a near-term tax break
For higher earners, traditional 401(k) catch-ups are a great way to not only build stronger nest eggs, but also capture more tax savings up front. The rules are changing in 2026.
As Jim Davis, CFP and Senior Wealth Advisor at Aspen Wealth Management, explains, “Starting in 2026, anyone earning over $145,000 who wants to make 401(k) catch-up contributions will need to put those extra dollars into a Roth account. That means paying taxes up front instead of getting the immediate deduction.”
The $145,000 threshold applies to income earned in the previous year. So if you have a $210,000 salary in 2025, it means you’ll be barred from making a pre-tax 401(k) catch-up in the new year.
It also means that if your company’s 401(k) plan doesn’t offer a Roth component, you may be barred from making catch-up contributions. However, this may only be a problem for a small percentage of savers. As of 2023, 93% of 401(k) plans had a Roth option, according to the Plan Sponsor Council of America.
There are still benefits to making 401(k) catch-ups
As a general rule of thumb, Roth contributions make sense when you expect to be in a higher tax bracket in retirement than you’re in today. It’s for this reason that higher earners often opt out of a Roth and choose to save in traditional retirement plans instead.
But just because the rules are changing with regard to catch-up contributions does not mean higher earners should forgo them. As Davis points out, with a Roth 401(k), “the money grows tax-free and withdrawals in retirement won’t be taxed.”
Brian Harrison, CFP and President at SAVVI Financial, thinks higher earners should recognize the value of getting to grow their money tax-free.
“The power of Roth contributions is something to consider, particularly as retirees are living longer,” he insists. “That tax-free growth decades down the line can make a big impact.”
Sherman Standberry, CPA and Managing Partner at My CPA Coach, agrees.
“I continue to inform high-earning clients that catch-up contributions are still a smart strategy,” he says. “Although this [change] results in higher taxable income, the trade-off is the ability to enjoy tax-free growth and withdrawals during retirement. This can create valuable tax diversification across pre-tax and Roth accounts.”
Standberry also points out that tax rates may increase in the future. Having a portion of savings in a Roth account helps protect against that.
Davis, meanwhile, points out that there may be some less obvious benefits to having money in a Roth.
"You also need to consider other moving parts in your plan," he explains. "Higher income can affect required minimum distributions, Social Security, and Medicare premiums, especially IRMAA."
A change worth embracing
The requirement for higher earners to make 401(k) catch-ups as Roth contributions might initially seem like a penalty of sorts. But Davis says they can still be useful to higher earners.
“The key is to view catch-ups as one piece of your overall plan,” he says. “How do they fit with your tax strategy, retirement income, and long-term cash flow?”
Of course, anyone who’s used to making 401(k) catch-ups on a pre-tax basis should work with a financial adviser or tax professional to adjust to this change. That could mean implementing other strategies to avoid a larger tax bill in the near term.
But that doesn’t mean higher earners should eschew 401(k) catch-ups in 2026 or beyond. At the end of the day, any money that sits and grows in a 401(k) — traditional or otherwise — gets special tax treatment, and there’s a real value in that.
As Davis says, “When used thoughtfully, catch-ups can help you save smarter — not just more — and keep more of what you’ve worked for as you move toward retirement.”
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