A key retirement planning tool is about to change — and if you’re a high earner over age 50, it could affect your tax strategy starting in 2026.
Under the SECURE 2.0 Act, Americans with FICA wages above $145,000 will no longer be allowed to make pre-tax catch-up contributions to their 401(k) plans. Instead, those catch-up contributions will have to be made on a Roth (after-tax) basis.
What should you know and why does it matter? Read more below.
What’s Changing?
Currently, individuals age 50 and older can make additional “catch-up” contributions to their retirement accounts on a pre-tax basis — effectively reducing taxable income while boosting retirement savings.
Beginning January 1, 2026:
- If your wages are $145,000 or less, you can still make pre-tax catch-up contributions
- If your wages are above $145,000, your catch-up contributions must go into a Roth account. That means no immediate tax deduction, but the money grows tax-free — and withdrawals in retirement are also tax-free (if requirements are met).
Why This Matters
For high earners, this change eliminates a valuable way to reduce taxable income in the near term. But it may also present new planning opportunities:
- Tax Diversification: Having both pre-tax and Roth accounts can provide flexibility in retirement
- Future Tax Savings: If you’re expecting tax rates to rise, paying taxes now through Roth contributions may work in your favor
- Alternative Savings Options: For those whose employer plans don’t allow Roth contributions, strategies like Health Savings Accounts (HSAs) or taxable investment accounts may become more important
What You Should Do Now
The change is a couple of months away, but proactive planning today can help you avoid surprises later. Consider questions like:
- How will this shift alter my retirement timeline?
- Should I adjust my savings strategy now to prepare?
- How does this change fit into my overall tax and financial plan?
We’re Here to Help
At The Hultquist Firm, we help businesses and their owners navigate tax law changes and identify opportunities within them. This rule change doesn’t have to hurt your plan — with the right strategy, it could strengthen your long-term retirement outlook.
Wondering how this change could affect you? Tax Strategy & Planning season is officially here – secure your spot now with The Hultquist Firm!
Existing Clients, please contact us at admin@thehultquistfirm.com to schedule your Initial Tax Planning Meeting!
New to The Hultquist Firm? Please fill out our contact form and our team will get back to you!
