Starting this year, if you’re 50 or older and earned more than $150,000 from your employer in 2025, your 401(k) catch-up contributions can’t go in pre-tax anymore. They have to be Roth. It’s a SECURE 2.0 rule, and 2026 is the first year it applies.
For high earners used to the pre-tax deduction, this feels like a tax hike. It isn’t — it’s a timing shift. You give up the deduction now, but that money grows and comes out tax-free later. And the catch-up is real money: an extra $8,000 if you’re 50 or older, $11,250 if you’re between 60 and 63.
There’s an upside most people miss. If your income keeps you out of a Roth IRA, this quietly forces Roth dollars into your plan anyway — and Roth 401(k)s no longer carry required distributions during your lifetime. So the money grows tax-free, comes out tax-free, and never gets dragged back onto a future tax return.
One detail trips people up. If your employer’s plan doesn’t offer a Roth option, high earners can’t make catch-up contributions at all — not Roth, not pre-tax. Most plans already offer Roth to keep the door open, but it’s worth confirming yours does before you assume the money’s going in.
The test is specific: it looks at your wages from that employer last year — the W-2 kind, not your total income. That creates a quirk for business owners. If you take K-1 income as a partner or LLC owner instead of a W-2 salary, you have no wages under the test — so the mandate doesn’t reach you at all.
Here’s what we’d tell any client right now: this is the kind of change that quietly costs people when no one’s watching the calendar. We build it into the plan before payroll does it for you — lining up the Roth catch-up with your bracket, your other conversions, and the rest of the year’s income. We’d rather plan the tax than react to it.
And if you’re weighing a Roth conversion this year, remember the catch-up no longer trims your taxable income the way it did. That leaves less room in your bracket — so size the conversion and the catch-up together, not in isolation.
If you want to make sure your 2026 contributions and conversions are working together, give us a call.
For informational and educational purposes only. Not investment, tax, or legal advice. Lake Hills Wealth Management is an SEC-registered investment advisor. Registration with the SEC does not imply a certain level of skill or training.