It’s human nature to wait until the last minute rather than plan ahead—perhaps especially when it comes to retirement planning. There’s always plenty of other excellent uses for your money, until suddenly you’re staring at an underfunded 401(k) with only a few years left before you’ll need it.
This is why president George W. Bush passed legislation in 2001 that (among other things) allowed for catch-up contributions among workers who were 50 or older. This gave older workers a chance to beef up their 401(k) accounts while they were typically at the peak of their earning years and let them continue to take advantage of making pre-tax contributions.
Other than increasing the amount of money 50+ workers can contribute, the basics of catch-up contributions have remained virtually the same for the past two decades—until now. As of calendar year 2027, the SECURE 2.0 Act eliminates the catch-up contribution tax break for 50+ workers earning $145,000 or more.
Here’s what you need to know about how this change may affect your retirement planning.
Current contribution and catch-up limits
As of 2025, workers may contribute up to $23,500 pre-tax to their 401(k) or other defined contribution workplace retirement plan. Workers over the age of 50 may put aside an additional $7,500 in catch-up contributions, for a total of $31,000, pre-tax. And any workers between the ages of 60 and 63 may make an $11,250 super catch-up contribution, for a total contribution limit of $34,750 in pre-tax dollars.
The ability to make these contributions pre-tax means 50+ workers get to reduce their tax burden for the current year by over $30,000, a huge tax benefit.
Same catch-up contributions, different tax breaks
But after December 31, 2026, the IRS will require you to make catch-up contributions with after-tax money if you earned $145,000 or more from your current employer in the previous year. In other words, if you’re over 50 and earn more than $145k in 2026, you’ll have to put in any 2027 catch-up contributions as after-tax Roth contributions.
This change does not affect regular contributions at all. Even if you are a high earning 50-something, every dollar of your regular contributions will be pre-tax (unless you choose otherwise). It is only the catch-up contributions that must be categorized as Roth contributions for high earning individuals.
Roth ain’t so bad, once you get used to it
There’s a very good reason why Uncle Sam made 401(k) plans tax-deferred: we’re much more likely to contribute money to our futures if we can get a tax break today. But the thing about this kind of upfront tax-break is that taxes will come due eventually. You will have to pay regular income taxes on 401(k) withdrawals in retirement.
Roth contributions, on the other hand, are made with money that has already been taxed. While that makes things a bit more expensive today, it can be a boon for your future self because the money grows and can be withdrawn tax-free in retirement.
(This is why I personally recommend having at least some money set aside in a Roth account. Investing in a Roth retirement account means you have a tax-free source of cash that won’t affect your Social Security benefits or other taxable income if you need access to a big chunk of money. For example, if you have a health issue in retirement, you can pull money from your Roth account without affecting the tax-balanced fixed income you’re living on.)
In addition, Roth 401(k) plans don’t require you to take required minimum distributions (RMDs) as of age 73, unlike traditional 401(k)s. That means you can let your money continue to grow in your Roth 401(k) past your 73rd birthday.
While potentially losing the tax break on catch-up contributions is not ideal, especially if you’ve been counting on it, there are some real benefits to having money in a Roth account for retirement.
How many workers will this really affect?
There is still time before the new rules go into effect, but it does raise an interesting question: just how widespread an issue will this be?
To start, only about 8.37% of individual workers earned $145,000 or more in 2024. As of 2025, there are an estimated 124.37 million Americans over the age of 50. If we assume 8.37% of 124.37 million 50+ Americans are earning $145k or more, that leaves us with 10,410,154 affected workers.
However, not everyone contributes to a 401(k) plan or other defined contribution plan. According to 2025 research by Gallup, only 66% of Americans over age 50 have money invested in a 401(k) plan, 403(b) plan, or IRA, either on their own, or jointly with a spouse.
If we assume that only 66% of workers earning over $145,000 are investing in a defined benefit plan, that leaves us with 6,870,701 potentially affected individuals.
That said, even if you’re not among the 6.8 million workers who might face this problem, you still may want to consider making Roth contributions. If your 401(k) plan doesn’t offer Roth contributions as an option, you can always open a Roth IRA on your own to take advantage of the same benefits.
Whether you’re under the age of 50 or earning less than $145,000, or both, you can still benefit from the upsides of a Roth.
Preparing for good problems
The upcoming changes to catch-up contribution rules can feel like having the rug pulled out from under you, but there’s still time to get ready for the shift. It’s also a good idea to remember that if you’re required to make Roth 401(k) catch-up contributions, it’s because you’re otherwise in pretty great financial shape. That’s because you:
- Could afford to max out your 401(k) annual contribution that was more than $23,500 for the year
- Earned at least $145,000 in 2026
- And still had money left over that you could contribute to your retirement account.
Though it may affect your tax strategy now, the new rules will also give you access to a Roth account that will grow tax-free and will be available for tax-free withdrawals without any RMDs.
The change also brings the benefits of Roth 401(k) plans into the spotlight, and may encourage more plan participants to make Roth contributions, even if the new rules don’t affect them.
All in all, the new rules may be a pain in the neck to plan for, but they’re mostly a net benefit.
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