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If you’re middle-aged and in a high-income bracket, changes are coming to your 401(k) contributions
This September, the Internal Revenue Service (IRS) announced new regulations changing the way catch-up contributions work starting in 2026. The IRS has introduced a new income test for taxpayers looking to contribute to particular retirement accounts, and it could hit high earners hard.
What you need to know about the new rules
In 2025, all workers can contribute up to $23,500 into 401(k) plans. However, workers over the age of 50 can make catch-up contributions to save more in these tax-advantaged accounts as they approach retirement.
As of 2026, workers in this age group will face a new income test. If you earned over $145,000 in the previous year from your current employer, your catch-up contributions may only be made to a Roth 401(k) plan.
The difference between a standard 401(k) and a Roth 401(k) is the tax treatment. Workers can contribute pre-tax income to a standard 401(k), which allows them to claim contributions as a deduction on their tax returns. A Roth 401(k) is designed for after-tax income, meaning you do not enjoy the tax deduction on contributions.
This new rule adds an upfront tax burden for high-income earners.
Implications for high-income earners
Just under one in five people between the ages of 45 and 54 earn over $100,000 a year, according to YouGov, so millions could be impacted by this new rule.
If you believe this rule change might affect you, reach out to your employer to see if they offer a Roth 401(k) plan. Nearly 93% of employers offer a Roth 401(k) plan, according to the Plan Sponsor Council of America.
Additional considerations and options
Multiple layers of complexity have been added to catch-up contributions, so consulting a financial adviser, certified financial planner, or tax lawyer is advisable to understand how the new rules impact you.
For those making well over six figures, working with financial experts who understand high-income households, like Range, can help navigate the complexities of tax strategies and maximize retirement savings.
Updating retirement plans to reflect the upfront tax burden starting next year is crucial. Exploring alternative tax-saving investments like commercial real estate, through platforms like First National Realty Partners (FNRP), can provide additional benefits.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNBC (1); YouGov (2); Groom Law Group (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
