The 2026 Roth catch-up rule: Who it affects and how to prepare

Older, high-earning workers take note: Starting in 2026, if you're 50 or older, earn more than $150,000 per year and are making catch-up contributions to your employer-sponsored retirement plan, that money must go into a Roth account.

It means you'll have to pay taxes on that money now, but qualified withdrawals in retirement will be tax-free.

If this federal rule on catch-up contributions applies to you, it's important to understand how it will impact your tax bill, both now and in the future. Here’s a look at what the rule means for your tax planning and retirement strategy, and how you can prepare for the transition.

When Congress enacted the SECURE Act 2.0, the Roth catch-up rule was included as a way to accelerate the collection of tax revenues on those contributions. 

Before now, any catch-up contributions made by someone 50 or older to a traditional workplace retirement plan—like a 401(k), 403(b) or 457(b)—received the same tax-deferred advantage as regular contributions. You’d get to deduct the value of the contribution from your income for tax purposes, but then the distribution would be taxed on the back end when the money was withdrawn in retirement.

The Roth catch‑up rule changes that tax treatment for certain high‑earning workers by shifting contributions from tax‑deferred to after‑tax status.

Starting Jan. 1, 2026, catch-up contributions made by people 50 or older who earned more than $150,000 from that employer in the previous year have to be put into a Roth 401(k), Roth 403(b) or Roth 457(b).

With contributions to a Roth account, you won't get an upfront tax deduction, but you’ll benefit in retirement when you are able to take tax-free withdrawals from the Roth account.

Only high earners aged 50 or older who are specifically contributing catch-up contributions to a workplace retirement plan are subject to the Roth catch-up rule. 

“High earners” are those who made $150,000 or more from the employer in the previous year. The income figure you need to look at is Social Security wages, found in Box 3 of your W-2.

It’s important to note that the rule applies to wages from each individual employer, which can matter if you work multiple jobs or have variable income sources. It's not based on your total income, your household income, adjusted gross income (AGI) or modified adjusted gross income (MAGI) like many other tax items are.

The Roth catch-up rule takes effect for contributions made in 2026. When the rule was first introduced, it was set to begin in 2024, but employers and plan administrators needed more time to prepare for implementation. 

If you think this rule may affect you, now is the time to review your contributions and confirm whether your plan offers a Roth option, since that will determine how your catch‑up dollars are handled.

If this rule applies to you and you’ve been making tax-deferred catch-up contributions, you will need to plan for tax and budget implications. That’s because you haven’t been paying income tax on those contributions but will need to include them in your taxable income going forward. It could mean you have more tax liability now but less in retirement, and you may have other benefits as well.

• You’ll pay taxes on those dollars now instead of later. Because you can’t deduct Roth contributions, you’ll now have to pay income tax at your marginal rate. But the flip side is that qualified withdrawals from Roth accounts are tax-free in retirement.
• Your paycheck could be smaller. Employers do not withhold taxes on tax-deferred contributions, but they do on Roth contributions. That means your take-home pay will be less, even if you contribute the same amount you were before. Consider how this might impact your budget.
• Your retirement savings could get a boost. Roth accounts grow tax-free, so the net value of your savings will be higher. Having a mix of tax-deferred and tax-free retirement savings also can provide tax diversification that may present opportunities for greater tax efficiency. 
• You’ll have flexibility with retirement spending. Roth accounts are not subject to required minimum distributions (RMDs), so you’ll have more control over how and when you withdraw your money in retirement.
• You may be able to leave more to your heirs (tax-free). Because RMDs won’t force the depletion of your Roth account, you may be able to leave more to your heirs. They may have to withdraw the funds within 10 years, but the withdrawals will be tax-free for them as well.

For the Roth catch-up contribution rule change, you need to evaluate your situation and take the necessary steps.

The first step is to find out if the rule applies to you. Review your contributions and income to verify whether you are making catch-up contributions and whether your income exceeds the limit. If you earned $150,000 or more from any one employer in the previous year and make tax-deferred catch-up contributions, then this rule will affect you.

If this rule is going to affect you, work with your tax professional to make sure you understand how. Any catch-up contributions now will be included in your taxable income and taxed at your marginal rate, which may change your withholding and affect your cash‑flow planning.

Also, talk with your financial advisor about the long-term implications and how this might affect your plans. 

If you are affected by the rule change, it's time to make a plan. You may see long‑term benefits in retirement because Roth withdrawals are tax‑free, which can help you manage taxes more strategically across different income sources. However, you might want to adjust your budget or reconsider how much you contribute if cash flow is going to be tight.