{"id":204078,"date":"2025-10-10T23:21:11","date_gmt":"2025-10-10T23:21:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/204078\/"},"modified":"2025-10-10T23:21:11","modified_gmt":"2025-10-10T23:21:11","slug":"high-earners-lose-401k-catch-up-tax-break-starting-in-2026-under-new-rules","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/204078\/","title":{"rendered":"High earners lose 401k catch-up tax break starting in 2026 under new rules"},"content":{"rendered":"\n

\u2018Barron\u2019s Roundtable\u2019 panelists analyze what the best strategies are for maximizing the earnings in your 401(k).<\/p>\n

A popular tax break for workers nearing retirement age to make extra catch-up contributions is changing next year, which will limit access to some high earners.<\/p>\n

The IRS issued new regulations last month to implement a provision of a 2022 law known as the SECURE 2.0 Act, which requires that high earners who earned $145,000 or more in gross income as an individual the prior year make\u00a0401(k) catch-up contributions<\/a> to after-tax Roth accounts starting with the 2026 tax year.<\/p>\n

Under the rules that will remain in effect through the 2025 tax year, workers aged 50 and up were eligible to make their 401(k) catch-up contributions to either a before-tax traditional account or an\u00a0after-tax Roth<\/a> account, depending on their preference and what their retirement plan allows.<\/p>\n

Making catch-up contributions on a before-tax basis allowed workers to receive an upfront tax break by using a deduction to reduce their taxable income \u2014 but the change means that high earners over the income threshold won’t have that option starting in the 2026 tax year.<\/p>\n

TRUMP’S 401(K) EXPANSION ORDER: WHAT NEW INVESTMENT OPTIONS WILL BE AVAILABLE?<\/a><\/p>\n

\"couple <\/p>\n

The new IRS regulations will mean that high earners’ 401(k) catch-up contributions won’t be eligible for a tax break starting in 2026. (iStock \/ iStock)<\/p>\n

Catch-up contributions are made in addition to normal\u00a0contributions to 401(k) accounts<\/a>.\u00a0<\/p>\n

In 2025, eligible workers over the age of 50 can make an extra $7,500 in contributions to their 401(k) in catch-up contributions in addition to the standard contribution limit of $23,500 for workers under 50.\u00a0<\/p>\n

There’s also a higher limit for workers between the ages of 60 and 63, who can make up to $11,250 in catch-up contributions in 2025.<\/p>\n

KEY GOP LAWMAKERS BACK TRUMP’S EXECUTIVE ORDER FOR CRYPTO, OTHER ALTERNATIVE ASSETS IN 401(K) PLANS<\/a><\/p>\n

\"IRS <\/p>\n

The IRS’ new regulations change 401(k) catch-up contributions for high earners starting in 2026. (J. David Ake\/Getty Images \/ Getty Images)<\/p>\n

Workers whose employer-sponsored retirement plans don’t currently have Roth 401(k) options may be unable to make catch-up contributions until one becomes available.\u00a0<\/p>\n

The\u00a0Wall Street Journal reported<\/a> that employers have been adding Roth 401(k) options, with Fidelity now including it as an option in 95% of managed plans, up from 73% two years ago, while 86% of Vanguard-managed 401(k) plans offer a Roth.<\/p>\n

GET FOX BUSINESS ON THE GO BY CLICKING HERE<\/a><\/p>\n

While savers who contribute to traditional 401(k) accounts receive the upfront tax break, they do owe income taxes for future withdrawals.\u00a0<\/p>\n

By contrast, contributions to Roth accounts lack the initial tax break but have\u00a0tax-free growth<\/a> and withdrawals.<\/p>\n","protected":false},"excerpt":{"rendered":"\u2018Barron\u2019s Roundtable\u2019 panelists analyze what the best strategies are for maximizing the earnings in your 401(k). A popular…\n","protected":false},"author":2,"featured_media":204079,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":{"0":"post-204078","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/204078","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=204078"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/204078\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/204079"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=204078"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=204078"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=204078"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}