{"id":68707,"date":"2025-10-11T22:20:07","date_gmt":"2025-10-11T22:20:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/68707\/"},"modified":"2025-10-11T22:20:07","modified_gmt":"2025-10-11T22:20:07","slug":"high-earners-will-lose-401k-tax-break-in-major-retirement-rule-change-starting-2026","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/68707\/","title":{"rendered":"High earners will lose 401(k) tax break in major retirement rule change starting 2026"},"content":{"rendered":"

A popular tax break for workers nearing retirement age allowing them 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 401(k)<\/a> catch-up contributions 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 after-tax Roth 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\u2019t have that option starting in the 2026 tax year.<\/p>\n

The SECURE 2.0 Act requires that people who earned at least $145,000 in gross income to make 401(k) catch-up contributions to after-tax Roth accounts starting next tax year. Damir Khabirov \u2013 stock.adobe.com<\/p>\n

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

There\u2019s 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

Catch-up contributions are made in addition to normal contributions to 401(k) accounts. Vitalii Vodolazskyi \u2013 stock.adobe.com<\/p>\n

Workers whose employer-sponsored retirement plans don\u2019t currently have Roth 401(k) options may be unable to make catch-up contributions until one becomes available.<\/p>\n

The Wall Street Journal reported 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

A general view of The United States Internal Revenue Service building building located at 1111 Constitution Avenue NW in Washington, DC as seen on April 15, 2025. Christopher Sadowski<\/p>\n

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

By contrast, contributions to Roth accounts lack the initial tax break but have tax-free growth and withdrawals.<\/p>\n","protected":false},"excerpt":{"rendered":"A popular tax break for workers nearing retirement age allowing them to make extra catch-up contributions is changing…\n","protected":false},"author":2,"featured_media":68708,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[6638,114,268,85,19476,46,266,267,688,1584],"class_list":{"0":"post-68707","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-401k","9":"tag-business","10":"tag-finance","11":"tag-il","12":"tag-irs","13":"tag-israel","14":"tag-personal-finance","15":"tag-personalfinance","16":"tag-retirement","17":"tag-taxes"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/68707","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=68707"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/68707\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/68708"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=68707"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=68707"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=68707"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}