Major Changes Coming To 401K, 403B, and 457 Retirement Plans in 2026, #280
There are important changes coming to 401 (k), 403 (b), and 457 retirement plans in 2026, so I’m focusing on how these updates may impact catch-up contributions for individuals over age 50. With the Secure Act 2.0 on the horizon, higher earners will soon have to make their catch-up contributions as Roth (post-tax) rather than pre-tax contributions, potentially affecting their take-home pay and tax strategies.
Tune in as I walk you through what you need to know, how to prepare for these new rules, and actionable steps to make the most of your retirement savings.
You will want to hear this episode if you are interested in...
[00:00] 2025 retirement contribution limits.
[05:26] Roth 401(k) catch-up contribution.
[08:05] 2026 salary tax example analysis.
[11:37] Tax impact on pre/post contributions.
[14:20] Tax-free Roth options.
Navigating the 2026 Catch-Up Contribution Changes
Employer-sponsored retirement plans, such as 401(k), 403(b), and 457, have long offered “catch-up contributions” for participants aged 50 and above. These extra contributions serve as a valuable tool for bolstering retirement savings during peak earning years.
The catch-up contribution limits for 2025 will allow participants to contribute an additional $7,500 on top of the standard $23,500 annual maximum, totaling $31,000. There’s also a “super catch-up” for those aged 60-63, which jumps to $11,250.
But starting in 2026, the Secure Act 2.0 introduces a pivotal change:
If you earned over $145,000 in 2025: You’ll be required to make catch-up (and super catch-up) contributions after tax to Roth accounts, not as pre-tax traditional contributions. For those earning under $145,000, it’s business as usual; you can still make catch-up contributions pre-tax if you choose.
How These Changes Impact Retirement Savers
The biggest impact? High-income earners will see an immediate difference in their take-home pay. Traditional pre-tax contributions typically reduce taxable income in the year made, lowering both federal and state taxes. Roth contributions, however, do not offer this upfront tax savings; instead, they provide tax-free withdrawals in retirement. This means that someone earning $170,000 could see their annual tax bill rise by nearly $2,300 when $8,000 of their retirement saving shifts from pre-tax to post-tax Roth dollars.
If you earn even more, say, $300,000, the annual difference climbs above $3,500, all while saving the same amount. The tax diversification benefit of Roth accounts remains, but the immediate budget hit is real.
Preparing for the 2026 Transition
These are my top tips for getting ready for 2026:
1. Check Your Plan’s Roth Options:
Verify with your HR or retirement plan administrator whether your employer plan supports Roth 401(k) (or equivalent) contributions. If it doesn’t, advocate for plan amendments, employers have until 2026 to comply.
2. Assess Payroll Impact:
Use online paycheck calculators to estimate your net pay under the new rules..
3. Consider Alternatives if Roth Isn’t Available:
If your employer doesn’t offer Roth options, you can still open a Roth IRA, though income limits may apply. Those exceeding these limits can explore the “backdoor” Roth IRA strategy or even simply invest in a taxable brokerage account with tax-efficient ETFs.
THe Long-Term Upside of Roth Savings
While losing the immediate tax break feels like a setback, forced Roth contributions offer unique advantages:
Tax-Free Growth: Money in Roth accounts grows tax-free, and withdrawals are also tax-free.
Estate Planning Boost: Funds left in Roth accounts can pass to heirs with minimal tax consequences.
Retirement Flexibility: Roth assets aren’t subject to required minimum distributions (RMDs) during the account owner’s lifetime.
A consistent series of $8,000 annual Roth catch-up contributions, invested over a decade at 6-8% returns, could grow to $105,000–$115,000 tax-free, with possible doubling over the next two decades if left untouched.
Change is coming to catch-up contributions for high earners, beginning in 2026. By understanding these new rules and taking proactive steps now, you can minimize disruption and position yourself for long-term retirement success. The road to retirement is always evolving, make sure your strategy evolves with it.
Resources Mentioned
Subscribe to the Retire with Ryan YouTube Channel