If you’re among the roughly 70% of workers in the United States who contribute to a 401(k) or similar workplace retirement plan, some important upcoming changes could affect how you make extra retirement contributions known as “catch-ups.”
These catch-up contributions let workers age 50 and older save beyond regular annual limits, helping boost retirement savings as they near retirement age.
New IRS rules tied to the SECURE 2.0 Act, passed a few years ago, now require certain higher earners to make those catch-up contributions exclusively on a Roth basis. That means contributions are made with after-tax dollars instead of pre-tax, but with tax-free withdrawals in retirement.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Initially, that change was slated to start with contributions made in 2024. But the IRS has finalized regulations giving employers and taxpayers some flexibility to adjust. Here’s more of what you need to know.
Roth catch-up contributions SECURE 2.0
Under SECURE 2.0, if you're at least age 50 and earned $145,000 or more in the previous year, you can make catch-up contributions to your employer-sponsored 401(k) account.
- But there’s a new catch. You'll eventually have to make those extra contributions on a Roth basis, using after-tax money.
- You wouldn’t be able to get tax deductions on those catch-up contributions as you would with typical 401(k) contributions.
- But you could withdraw the money tax-free when you retire.
Note: The SECURE 2.0 Roth catch-up contribution rule won’t apply to taxpayers making $144,999 or less in a tax year.
For example, using the 2025 contribution limits as a reference (2026 limits aren’t yet available), you can contribute up to $23,000 to your 401(k), plus an additional $7,500 catch-up contribution if you're 50 or older, totaling $30,500.
- Under the new rule, the $23,000 regular contributions would still be made pre-tax, but the $7,500 catch-up amount must be made in a Roth account.
- You would pay taxes upfront on the catch-up amount, but withdrawals of that money in retirement would be tax-free.
*This is a simplified example, and the $23,000 and $7,500 figures are 2025 limits used for that purpose. Those amounts might increase for 2026 due to inflation adjustments.
The final regulations state that full applicability of the Roth catch-up rule will generally take effect for most plans beginning after December 31, 2026. (Certain governmental plans and plans maintained under a collective bargaining agreement might get more time to adjust.)
However, some might note that the catch-up rule technically applies as of January 1, 2026. But the 2027 date essentially gives employers and plans a grace period (of sorts) as they work in good faith to ensure their plans fully comply with the new rules.
Per an IRS release: "The final regulations also permit plans to implement the Roth catch-up requirement for taxable years beginning before 2027 using a reasonable, good faith interpretation of statutory provisions."
More clarification on Roth catch-up contributions
The IRS final rules also clarify other questions, like how employers determine if an employee’s income exceeds the $145,000 threshold.
- Employers that are part of a controlled or affiliated service group can combine wages from related companies to make this calculation, which helps avoid confusion for workers with multiple related employers.
- Additionally, if a catch-up contribution is mistakenly made as a pre-tax contribution instead of a Roth, the final rules explain that plans have until the end of the following plan year to correct it.
The IRS notes that the grace period is designed to reduce administrative burdens and give participants and employers more time to correct errors.
As Kiplinger had reported, more than 200 entities, made up of Fortune 500 companies, firms and public employers, including the American Retirement Association, Chipotle Mexican Grill, Fidelity Investments, Charles Schwab, Microsoft Corporation and Delta Airlines, had initially asked Congress (PDF) for a two-year delay to the Roth catch-up rule.
What the IRS final catch-up regulations mean for you
If you’re an employee age 50 and older, you can continue making catch-up contributions to your retirement accounts for now. However, once the rules are fully implemented (or sooner in some cases), high earners will need to make Roth-only catch-up contributions.
In addition, the IRS confirmed the “super catch-up” provision under the SECURE 2.0 Act, effective beginning with the current 2025 tax year.
As Kiplinger has reported, workers ages 60 to 63 can contribute significantly more above the standard catch-up limits — up to $11,250 in 2025.
For more information, see: New SECURE 2.0 Super 401(k) Contribution Catch-Ups.
As always, consult a tax or financial professional to determine how these and other tax changes might impact your retirement savings strategy.
Note: This article has been updated to clarify the nature of the 2027 date for full applicability of the final regulations.
Read More
-
This Is Why Investors Shouldn't Romanticize BitcoinInvestors should treat bitcoin as the high-risk asset it is. A look at the data indicates a small portfolio allocation for most investors would be the safest.
-
I'm a Federal Benefits Pro: I Answer These 2 Questions a LotMany federal employees ask about rolling a TSP into an IRA and parsing options for survivor benefits, both especially critical topics.
-
An Income Strategy for a Volatile Market: Guide for AdvisersAdvisers are increasingly turning to private credit such as asset-based and real estate lending for elevated yields and protection backed by tangible assets.
-
Is a New $25,000 Health Care Tax Deduction Coming in 2026?Tax Policy A proposal from GOP Sen. Josh Hawley is adding to the chatter about health care affordability.
-
Costco Sues Over Trump Tariffs: What Could That Mean for Prices in 2026?Tariffs The retailer is making headlines not just for its famous hot dog and gold bars but for suing the Trump administration over tariffs.
-
Social Security Benefits Quiz : Do You Know the IRS Tax Rules?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
New 2026 Tax Change Could Mean More for Your IRA and 401(k) SavingsRetirement Savings Here's how the new IRS inflation adjustments will increase the contribution limits for your 401(k) and IRA in the new year.
-
Capital Gains Tax Quiz: How Well Do You Really Know IRS Investment Tax Rules?Quiz Take our capital gains tax quiz to test your investment taxes knowledge. Learn about loss rules, holding periods, and tax incentives that could impact your savings.
-
6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)Retirement Taxes Here’s how converting your traditional retirement account to a Roth IRA can boost your nest egg — but avoid these costly scenarios.
-
3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025Tax Deductions New charitable giving tax rules will soon lower your deduction for donations to charity — here’s what you should do now.
-
Another State Bans Capital Gains Taxes: Will More Follow in 2026?Capital Gains A constitutional amendment blocking future taxes on realized and unrealized capital could raise interesting questions for other states.
