Beginning in 2026, certain high-income taxpayers’ 401(k) and 403(b) plan catch-up contributions must be designated as after-tax Roth contributions.
Background
Historically, individuals aged 50 and older could boost their retirement savings by contributing additional pre-tax dollars to their employer-sponsored retirement savings plans above the statutory threshold and receiving a corresponding tax deduction that reduced their taxable income in the years of funding.
For example, in 2025, workers aged 50 and older can contribute an additional $7,500 in pre-tax catch-up contributions to their employer-sponsored plans, above the $23,500 maximum statutory threshold. The amount for individuals ages 60 to 63 is $11,250. All contributions grow tax-deferred until savers take withdrawals in retirement, when they must pay taxes on those amounts at their ordinary income tax rates. When savers reach age 73, they must begin taking annual required minimum distributions (RMDs) from their accounts and paying the related income tax liabilities.
By contrast, contributions to Roth 401(k)s are made with after-tax dollars that are subject to income tax in the year of contribution. While plan participants lose the tax deduction in their years of contributions, their withdrawals after age 59½ are tax-free.
SECURE Act Changes to Catch-Up Contributions
Workers who earn more than $145,000 during the 2025 tax year (indexed for inflation) must treat their 401(k) and 403(b) catch-up contributions as after-tax Roth contributions beginning in tax years after Dec. 31, 2025. This means higher-income savers will lose a tax deduction for their catch-up contributions starting in 2026 and the opportunity to reduce their taxable income by those additional amounts.
Workers who earn more than $145,000 (indexed for inflation) from their employer for taxable years beginning after Dec. 31, 2025, must treat their 401(k) and 403(b) catch-up contributions as after-tax Roth contributions. This means higher-income savers will lose a tax deduction for their catch-up contributions and the opportunity to reduce their taxable income by those additional amounts. On the plus side, withdrawals taken after age 59½ will be tax-free, and account owners will not be subject to RMD requirements when they reach age 73. The actual benefits of these changes depend on each saver’s unique circumstances.
For example, the loss of the deduction for Roth catch-up contributions can result in a higher taxable income, which may affect the taxpayers’ eligibility for other deductions, including those for state and local tax payments, charitable donations and qualified business income (QBI). On the other hand, the ability to escape RMDs and taxes on withdrawals in the future via Roth contributions today could be especially appealing to those individuals who expect to remain in a high tax bracket in retirement and have significant assets to pass on to future generations.
Plan participants should meet with their trusted advisors to understand the nuances of the law and discuss all the strategies available to effectively manage their tax liabilities today and plan for tax efficiency in retirement.
About the Author: Danielle Keyes is a retirement plan consultant with Provenance Wealth Advisor (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. She can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
Danielle Keyes is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC. Investment Advisory Services are offered through Provenance Wealth Advisors, LLC, an SEC-registered investment adviser.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Before making any investment decision, please consult with your financial advisor about your individual situation.
Every investor’s situation is unique. You should consider your investment goals, risk tolerance and time horizon before making any investment or withdrawal decision. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected.
401(k) plans are long-term retirement savings vehicles. Withdrawals of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken before age 59½, may be subject to a 10 percent federal tax penalty. Investing involves risk. Investors may incur a profit or loss regardless of the strategy or strategies employed. Future investment performance cannot be guaranteed. Matching contributions from an employer may be subject to a vesting schedule. Please review your retirement plan documents or consult with a financial professional for more information.
Posted on October 14, 2025