This week we are focusing on just one topic, the new rule for “catch-up” contributions for workers over age 50. For many years, workers over 50 have been able to make additional contributions to their employer-sponsored retirement accounts, above-and-beyond the normal employee deferral amount (set to be $24,500 in 2026).
New for 2026, if your w-2 compensation in 2025 was $145,000 or more, any catch-up contributions must be made as Roth (after-tax) contributions.
Just to make things a little more complicated, there are two different catch-up limits, depending on your age.
The normal catch-up amount for individuals 50 or older is $8,000.
If you are 60-63 years old, you can contribute a larger amount, $11,250.
Most retirement plans are set up for percentage-based deferrals. With this new provision, higher earners may want to make “flat-dollar” contributions instead. This will help ensure that you max out your pre-tax normal deferrals while also taking advantage of the additional catch-up amount. This means dividing the total for each contribution type by the number of payrolls in the year.
Even though higher earners lose the tax deduction they previously enjoyed, we still recommend contributing the maximum amount to your 401(k) or 403(b) plan. Having a mix of pre- and post-tax income sources is very helpful in retirement.
Please let us know if you have any questions about this. Now is an excellent time to make those changes and ensure that your 2026 contributions proceed according to plan.
With higher limits available in 2026 for all workers, don’t miss out!