If you’re a worker 50 or older, you’ve been able to make catch-up contributions to employer-sponsored retirement plans like 401(k), 403(b), and 457(b) accounts. Before this year, you had the option to add to those accounts before taxes, lowering your total taxable income. The caveat was that you would be taxed later. That’s no longer an option.
The New Rule
Starting in 2026, earners whose FICA wages were over $150,000 in 2025 are required to contribute to their retirement accounts from their after-tax income. It’s a double whammy for some: they'll move into a higher tax bracket with the increased pre-tax income and will also have less of their paychecks available after contributions and taxes.
This new rule is a condition of the SECURE 2.0 Act and will affect any contributions made in 2026.
What It Means For You
Roth accounts are great long-term planning tools that allow you to bank money now and draw on it, including interest, later in life without paying taxes on withdrawals. If this option is available to you through your employer, then you may actually come out ahead when you’re taking money out during your retirement.
Related: Retirees Face Some Huge Threats Thanks to Inflation Sitting at a 3-Year High
The rules may have changed this year, but for many filers, they could end up working out better for them in the long run.
Disclaimer: This article is for informational purposes only and does not constitute advice.
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