2026 Retirement Rule

What Is the 2026 Retirement Rule?

Starting in 2026, a key retirement savings rule changes how catch-up contributions must be handled for higher-earning individuals aged 50 and older.

Who’s Affected?

If in 2025 you earned more than $145,000 in FICA wages (as reported in Box 3 of your W-2), then:

Any catch-up contributions you make in 2026 to your employer-sponsored plan, such as a 401(k), 403(b), or 457(b)—must be made on an after-tax Roth basis, not pre-tax traditional. SVA Certified Public AccountantsMunshi Premchand MavavidyalayaAldrich WealthOwn Your FutureEmployee Fiduciary

This is a significant shift, especially for high earners who previously benefited from immediate tax deductions by contributing pre-tax.

KEY DETAILS

Compensation Threshold

• The threshold is based on FICA wages, not the traditional Highly Compensated Employee (HCE) threshold.
• This means some employees might still be eligible for pre-tax contributions even if they earn more overall—if their FICA wages remain below the limit Aldrich WealthEmployee Fiduciary.

2025 Catch-Up Limits

• Standard catch-up limit: $7,500.
• Those aged 60–63 in 2025 get a higher “super catch-up” limit—$11,250 (150% of the standard) The Tax AdviserMcLane MiddletonForvis MazarsEmployee Fiduciary.
• Importantly, in 2026, all eligible catch-up contributions—whether standard or super—must be made via Roth if you exceed the wage threshold Forvis MazarsMunshi Premchand MavavidyalayaAldrich WealthEmployee Fiduciary.

What If Your Plan Lacks Roth Options?

If your employer-sponsored plan does not offer a Roth contribution option:

• Those above the threshold cannot make catch-up contributions at all in 2026. Aldrich WealthOwn Your FutureEmployee Fiduciary
• That makes it critical for plan sponsors to add Roth capabilities before January 1, 2026, if they want high earners in their workforce to continue saving via catch-up contributions Forvis MazarsMunshi Premchand Mavavidyalaya.

Planning Tips

• Check your 2025 W-2 (Box 3) to see if your FICA wages exceed $145,000.
• If so, plan for Roth-only catch-up contributions in 2026.
• Those under the threshold still have flexibility: choose pre-tax or Roth if your plan allows.
• Employers should update plan features now to include Roth catch-up options to maintain full participation.

Catch-Up Rule Summary

• 2025 - Standard limits ($7,500; $11,250 for ages 60–63) with pre-tax or Roth options
• 2026 - If FICA wages > $145K → Roth-only catch-up contributions required
• If plan lacks Roth option - Affected employees lose catch-up ability entirely.