If you’re over 50 and have been working on maxing out your retirement account, you’ll need to check on your contributions before your next paycheck. Anyone making $150,000 a year or more now has new rules on where they can contribute to their retirement. The threshold is based on Social Security FICA wages reported in Box 3 of your W-2 and includes only previous-year wages from the company sponsoring the retirement plan. Before 2026, you had a choice; now you don’t.
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.
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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.
There’s no wiggle room either. If you earn even one dollar over the $150,000 threshold, all of your catch-up funds are now required to be deposited into a Roth account. The good news is that you’ll avoid tax, including withdrawals, on that money in the future. The bad news is that many employers don’t have the Roth option, meaning that some workers may not be able to make those contributions at all.
This new rule is a condition of the SECURE 2.0 Act and will affect any contributions made in 2026.
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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.
However, if you don’t currently have the option available to you, you’re not completely left out. Even if your income is too high for a standard Roth IRA, there are still options. A financial planner will be able to help you navigate the new laws and see where you can add those funds to your nest egg.
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So many employers have made it easy to set and forget your retirement contributions, so if you haven’t looked at them yet this year, it’s time to see what’s going on. Employers with the Roth option should have a way to help you make your contributions, but filers who don’t have that option should consult a financial planner.
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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