Dear Customers,
We want to make you aware of an important change to retirement plan rules that may affect you beginning in 2026 under the SECURE 2.0 Act.
Who This Applies To
This change applies only if both of the following are true:
- You are age 50 or older, and
- Your prior-year W-2 FICA wages (Box 3) exceeded $150,000
IF you are under age 50 or your W-2 FICA wages were $150,000 or less, this change does NOT apply to you.
What’s Changing in 2026
Starting in 2026, the IRS will require certain higher-earning individuals to make their 401(k) catch-up contributions as Roth (after-tax) contributions, rather than pre-tax.
Key changes include:
- High earners: $150,000 or more in prior-year FICA wages (Box 3 of W-2):
401k Catch-up contributions must be made to a Roth account (after-tax) - Lower earners (under $150,000):
May continue making catch-up contributions to pre-tax or Roth, as they do today. - Catch-up contribution limits for 2026:
- Standard catch-up (age 50+): $8,000
- “Super catch-up” (ages 60–63): $11,250, if allowed by the plan
Again, these amounts must be Roth for high earners.
- Total 401(k) contribution limit for 2026:
$24,500, plus any applicable catch-up contributions.
What You Need to Do
To avoid issues with your catch-up contributions, we recommend the following steps if over age 50 and making catchup retirement contributions:
- Review your 2025 W-2:
Check Box 3 (Social Security wages) from the prior year to see if your earnings exceeded $150,000 - Confirm your plan’s features:
Verify whether your employer’s 401(k) plan offers a Roth contribution option - Contact your plan administrator:
If you are a high earner, ensure your catch-up contributions are correctly directed to the Roth side of the plan. If your plan does not allow Roth contributions, catch-up contributions may not be permitted until the plan is updated.
This rule is intended to promote tax-free growth for higher-earning individuals saving later in their careers, but it does require after-tax contributions for those above the income threshold.
If you would like help reviewing how this change affects your retirement or tax planning strategy, please don’t hesitate to reach out to your GBE advisor.