Starting in 2026, workers aged 50 and older who earn more than $145,000 will no longer be able to make traditional pre-tax 401(k) catch-up contributions. Instead, those extra contributions must go into a Roth 401(k), meaning taxes are paid upfront but future withdrawals are tax-free. This change, part of the SECURE 2.0 Act, was delayed to give employers and plan administrators more time to prepare – but that grace period ends soon.
In a recent article, Jay Cirame emphasized that “financial advisors working with 401(k) sponsors or clients earning more than $145,000” now have little time to ensure Roth accounts are set up and that clients understand the change. He noted that the transition poses “system challenges for the industry as a whole,” requiring close coordination between plan sponsors, payroll providers, and recordkeepers.
Cirame added that employers are expected to apply the new rule under “good faith efforts,” meaning they should act diligently and reasonably as the shift takes effect. For employees, he explained, it’s important to weigh the trade-off – losing the current tax deduction but gaining tax-free growth later. His advice to high earners: “It would be most advantageous for them to elect Roth at the beginning of the year,” since starting early gives contributions more time to grow tax-free.
"For 2026, you need to apply the rule under good faith efforts. That essentially means you'll be diligent and reasonable in applying the new rule."
Interested in learning more? Find the full Financial Planning article here.
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