Your Money
Workers age 50 and older can contribute up to $31,000 to their 401(k) in 2025—the standard $23,500 limit plus an additional $7,500 "catch-up contribution" designed to help near-retirees boost savings. But starting in 2026, workers earning over $145,000 must make these catch-up contributions to Roth accounts instead of traditional pre-tax accounts, meaning they'll pay taxes upfront rather than getting an immediate deduction.
Despite this change, I believe catch-up contributions remain worthwhile. The tax-free growth and withdrawals offered by Roth accounts provide valuable benefits, especially for those living longer in retirement. Additionally, Roth savings create tax diversification and protect against future tax rate increases.
Having Roth assets can also help manage other retirement concerns, including required minimum distributions, Social Security taxation, and Medicare IRMAA surcharges. While the 2026 rule may initially seem like a penalty, we recommend viewing catch-ups as part of a comprehensive retirement strategy.
The bottom line: Higher earners shouldn't abandon catch-up contributions. With proper planning and professional guidance to manage near-term tax impacts, Roth catch-ups can help you "save smarter—not just more" as you approach retirement.
I may lose a 401(k) tax break in 2026. Should I max out my 401(k) anyway?
by Maurie Backman
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