Your 2026 Catch-Up Contribution May Already Be Roth

Originally published on the Golden Acre Notebook on October 27, 2026. Figures are for tax year 2026.

Starting January 1, 2026, if your 2025 wages from your employer topped $150,000, every catch-up dollar you put into your 401(k) this year has to go in as Roth. If your plan has no Roth option, you cannot make a catch-up contribution at all, and you have until the last paycheck of December to find out which of those happened to you.

If your plan made the switch for you, your election screen may still say pre-tax while your paystub says Roth, and the difference shows up on your 2026 tax return whether you noticed it or not.

What changed

The rule comes from the SECURE 2.0 Act, and the IRS issued final regulations in September 2025. It covers 401(k), 403(b) and most governmental 457(b) plans. It does not apply to SEP or SIMPLE IRA plans.

For 2026 the regular employee contribution limit is $24,500. If you are 50 or older you can add a catch-up contribution of $8,000 on top of that. If you turn 60, 61, 62 or 63 this year, the catch-up is $11,250 instead.

The new rule only touches the catch-up. Your first $24,500 can still go in pre-tax. The dollars above that line must be Roth if your Social Security wages from the employer that sponsors the plan were more than $150,000 in 2025. That figure is in Box 3 of the W-2 that employer sent you last winter.

Roth money goes in after tax. You get no deduction this year, and qualified withdrawals in retirement come out tax-free.

Who it applies to and who it skips

The test looks at one employer's wages from the prior year, which leads to three cases worth checking.

• You changed jobs in 2026. Your new employer paid you nothing in 2025, so the rule does not reach you at that employer this year, however much you earn.

• You are self-employed or a partner. A partner's income and a sole proprietor's earnings are not FICA wages, so a solo 401(k) or a partnership plan is generally outside the rule.

• You earned just under $150,000 in 2025 and got a raise. The 2025 figure is what counts for 2026. Your 2026 pay decides 2027.

The threshold rises with inflation. It began at $145,000 in the statute and is $150,000 for the 2026 test.

How a plan handles it

Plans handle the rule in one of three ways, and you may not have been told which one yours uses.

The first is a deemed Roth election. You elected pre-tax, and once your year-to-date contributions pass $24,500 the plan treats the rest as Roth. Your contribution percentage never changes. The paystub line does.

The second is to stop your contributions at $24,500 and ask you to make a separate Roth catch-up election.

The third applies to plans with no Roth feature at all. They cannot accept a catch-up contribution from anyone the rule covers, so your contributions stop at $24,500.

A worked example with 2026 numbers

Take a married couple in Chandler. One spouse is 61 and works for a large employer, with $172,000 in Box 3 of a 2025 W-2 and a 2026 salary of $178,000. The other spouse has no earned income. They have no other income, and they take the $32,200 standard deduction.

Without the new rule they would put the full $35,750 in pre-tax: $24,500 plus the $11,250 catch-up for ages 60 to 63. That leaves adjusted gross income of $142,250 and taxable income of $110,050.

In 2026 the $11,250 catch-up goes in as Roth. Adjusted gross income rises to $153,500 and taxable income to $121,300. Both sit inside the 22% bracket, which runs to $211,400 for a couple.

Federal tax goes up by $2,475. Arizona's 2.5% flat tax adds about $281. The couple saves the same $35,750 they always did and pays about $2,750 more in tax for 2026.

If the same spouse keeps working through 63 at a similar salary, that is roughly $11,000 of tax paid over four years on $45,000 of catch-up contributions.

Whether paying the tax now is a bad deal

It depends on your tax bracket in retirement, and that can be projected.

If this couple will be in the 12% bracket after they stop working, paying 22% now costs them about 10 cents on every catch-up dollar, or about $1,125 a year. If they will still be in the 22% bracket, because of a pension, Social Security and required minimum distributions, it is roughly even. If they land in the 24% bracket, the Roth comes out ahead.

Roth money in a workplace plan has one more advantage. Since 2024 a Roth 401(k) has no required minimum distributions during the owner's lifetime. As our post on first RMDs shows, RMDs on a large pre-tax balance can push a retired couple into a higher bracket and a higher Medicare premium years later. Dollars held as Roth do not add to that.

What it costs to get this wrong

The most expensive case is the plan with no Roth option. A 61-year-old who cannot make a catch-up loses $11,250 of tax-advantaged contribution room this year, and $45,000 across the four years from 60 to 63. That room does not carry forward. The IRA catch-up of $1,100 is separate and still available, but it does not replace a workplace catch-up of $11,250.

The second cost is a tax plan built on the wrong number. If you sized a 2026 Roth conversion to fill the 22% bracket, and your projection assumed the catch-up was pre-tax, you converted $11,250 too much. For the Chandler couple, the room left to the top of the 22% bracket shrank from $101,350 to $90,100. The extra $11,250 is taxed at 24% instead of 22%. That costs only about $225, but it is avoidable. The sizing method in our Roth conversion post works the same way, with the Roth catch-up counted as income.

The third cost applies if you are 63 this year. Medicare sets your premiums from the return two years earlier, so your 2026 income sets what you pay in 2028. The 2026 surcharge starts at $218,000 for a couple, and the 2028 threshold is not yet published, so treat any 2028 figure as an estimate. If your income sits within about $11,000 of that line, losing the pre-tax catch-up can push you over it, and the surcharge applies to both spouses for the whole year.

What to check before December

Pull your 2025 W-2 from your current employer and look at Box 3. If it is over $150,000, the rule applies to you this year.

Look at a recent paystub. Find your year-to-date pre-tax contributions. If they have passed $24,500, look for a Roth 401(k) or Roth catch-up line. If there is none and your contributions have stopped, your plan probably has no Roth feature.

Read the plan notice your employer sent about the change, or ask HR which of the three methods the plan uses.

Then rerun your 2026 tax projection with the catch-up counted as taxable income, before you make any Roth conversion or year-end charitable gift that depends on where your income lands.

I am an Enrolled Agent, admitted to practice before the Internal Revenue Service, and I prepare returns alongside the planning work, so the paystub, the projection and the return all get checked by the same person.

If you want your 2026 contributions run against your own projection before the last paycheck of the year, that is a conversation worth having.

Aaron Randak, CFP®, EA · Golden Acre Wealth Management · Scottsdale, Arizona

Golden Acre LLC dba Golden Acre Wealth Management is an investment adviser registered with the Arizona Corporation Commission, CRD #337930. This article is educational and is not individualized tax, investment, or legal advice. Tax rules change and their application depends on your specific circumstances, including your plan's terms and your employer's payroll setup. Medicare premium thresholds for 2028 have not been published; figures shown use 2026 amounts for illustration.