Dec 1, 2025
The American tax code is undergoing sweeping changes from multiple pieces of legislation.
Although the new tax cuts and deductions have captured much public discourse, a small change baked into the SECURE Act 2.0 could have far-reaching implications for a niche group of investors and savers.
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Specifically, this rule changes the way seniors can make catch-up contributions to their retirement accounts. If you’re over a certain age and income threshold, these shifts could have far-reaching implications for your long-term savings and investment plans.
Here’s what you need to know.
Catch-up contribution changes
Signed into law at the end of 2022 by President Joe Biden, the SECURE ACT 2.0 was focused on encouraging people to build a larger nest egg for retirement. It includes major changes to 401(k), IRA, Roth and other retirement savings plans that broaden coverage and offer greater flexibility (1).
Perhaps the most noteworthy change is the introduction of a so-called “super catch-up” contribution limit for seniors. If you’re between the ages of 60 and 63, you can make an additional $11,250 contribution to your 401(k), starting in 2025.
Meanwhile, according to the IRS, those over the age of 50 can make an additional $8,000 in catch-up contributions in 2026.
However, the law also introduces a new income-based restriction on catch-up contributions. Starting in 2026, if you’re over the age of 50 and earn more than $145,000, your catch-up contributions must go to a Roth 401(k) instead of a traditional 401(k).
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This might seem like a small technicality, but for high-income seniors, this change implies a larger upfront tax bill.
That’s because contributions to a Roth 401(k) are done on an after-tax basis. In other words, you no longer get the tax deduction feature, which is typically associated with a traditional 401(k) contribution.
So a 60-year-old with an income of 192,000 looking to make a super catch-up contribution of $11,250 could pay nearly $3,600 in taxes alone if her marginal tax rate is 32% (2). Similarly, a 51-year-old with a marginal tax rate of 24% could pay $1,920 in taxes on her $8,000 catch-up contribution next year. Given the fact that one in five people between the ages of 45 and 55 earn more than $100,000, according to YouGov, this change could impact millions of Americans (3).
If these changes might impact you, it’s time to act quickly to minimize the tax liability.
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How to prepare for the changes
If you’re above the age thresholds that qualify for either catch-up or super catch-up contributions, you can start by estimating how much money you’re likely to earn next year. If you believe your income in 2026 could exceed $145,000, this new restriction may apply to you.
The next step is to ensure that your employer offers a Roth 401(k) plan.
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Roughly 93% of employers now provide a Roth 401(k), Plan Sponsor Council of America data show, but your company could still fall into the minority that doesn’t (4). Speak to your manager to find out if they already offer a Roth 401(k) or if they plan to integrate it in 2026 so you know what your investment options are in the coming year.
Finally, you could reach out to a tax advisor or financial planner to adjust your long-term savings and investment plans. If your plan includes aggressive catch-up contributions in the final stretch of your career, this new rule could expose you to higher tax liabilities upfront.
However, unlike a traditional 401(k) plan, withdrawing money from a Roth 401(k) is tax-free under certain conditions. If you’re over the age of 59½ and the account is older than five years, you can make a qualified withdrawal from your Roth 401(k), which is not subject to any taxes or penalties. By comparison, all withdrawals from a traditional 401(k) plan are typically taxed as ordinary income.
Simply put, the changes mean if you’re above a certain age and income threshold, you could face a higher tax liability next year, but a potentially lower tax liability in the future. If this new rule impacts you, now is the perfect time to adjust your long-term retirement plan accordingly.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
United States Senate Committee on Finance (1); IRS (2); YouGov (2); CNBC (3)
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
