If you’re over 50 and earn a higher income, a new IRS rule could quietly increase your tax bill starting in 2026 — even if you don’t change how much you save for retirement.
The change has to do with catch-up contributions to 401(k) plans and how they must be taxed going forward. Here’s what you need to know:
What’s Changing?
The IRS has finalized new rules under the SECURE 2.0 Act that affect how certain workers can make catch-up contributions to their 401(k) retirement plans.
Beginning in 2026:
- If you are age 50 or older, and
- You earned FICA-taxable wages exceeding $150,000 (indexed for inflation) in the preceding calendar year
Your catch-up contributions must be made as Roth contributions — meaning after-tax, not pre-tax money.
Why This Matters for Your Taxes
Before this rule, you could usually choose whether your catch-up contributions were:
- Pre-tax (lowering your taxable income today), or
- Roth (taxed now, but tax-free later)
Under the new rules, higher-income workers lose that choice. If you were previously making pre-tax catch-up contributions, your taxable income will now be higher — even though you’re saving the same amount. That’s why your tax bill may increase.
What If My 401(k) Plan Doesn’t Offer a Roth Option?
If your employer’s 401(k) plan does not allow Roth contributions, then highly paid employees cannot make any catch-up contributions at all — pre-tax or Roth.
The good news is that most plans already offer Roth options. In 2023, about 93% of 401(k) plans did, and employers can add Roth features if they don’t already have them.
When Does This Take Effect?
- The rule generally applies to tax years beginning after December 31, 2026
- Some government and union plans have delayed timelines
- Employers may choose to implement the rule earlier
What Should You Do Now?
If this rule may affect you, it’s worth planning ahead:
- Review how higher taxable income could affect your overall tax picture
- Consider whether increasing Roth savings earlier makes sense
- Coordinate retirement contributions with broader tax planning
All in all, this change doesn’t mean Roth savings are bad — but it does remove flexibility for higher-income workers. Understanding the rule now gives you time to plan, adjust, and avoid surprises when 2026 arrives.