Additional Coverage:
- Key 401(k) changes in 2026 that Americans preparing for retirement shouldn’t ignore (marketrealist.com)
Big Changes Ahead for Your 401(k) in 2026: What High Earners Need to Know
As 2026 approaches, significant shifts are on the horizon for 401(k) retirement savings plans, and those preparing for retirement, especially high-income earners, should take note. These changes include a major overhaul in taxation rules and an increase in contribution limits.
Juan Ros, a certified financial planner with Arizona-based Forum Financial Management, emphasizes that these updates will primarily impact individuals with higher incomes.
For those unfamiliar, a 401(k) is an employer-sponsored retirement savings plan that allows employees to save and invest a portion of their income on a tax-deferred basis. Funds within a 401(k) grow without being taxed until they are withdrawn in retirement. A major benefit of these plans is the potential for employer contributions, which can significantly boost one’s retirement nest egg.
These upcoming changes arrive amidst a period of economic uncertainty, characterized by rising inflation, a volatile stock market, and evolving administrative policies. These factors have understandably made the public more cautious about their personal finances.
Increased Contribution Limits
One of the most welcome changes for many is the ability to contribute more to their 401(k). According to a CNBC report, the employee deferral limit will rise to $24,500 in 2026, a $1,000 increase from the $23,500 limit in 2025. The IRS announced this adjustment in November.
For those aged 50 and older, the “catch-up” contribution limit will also see an increase, moving from $7,500 to $8,000. However, the “super catch-up” contribution for individuals between 60 and 63 years old will remain at $11,250. CFP André Small highlights the importance of these increases, stating, “These increases matter because they help retirement savers keep pace with rising incomes and inflation while reducing taxable income in high-earning years.”
A Major Shift in Catch-Up Contribution Taxation
Perhaps the most significant change concerns the taxation of catch-up contributions. Currently, investors aged 50 and older can make catch-up contributions as either traditional pre-tax or after-tax Roth contributions. However, this flexibility will change in 2026.
Starting in 2026, catch-up contributions for individuals who earned more than $150,000 from their current employer in 2025 will generally need to be after-tax Roth contributions, as reported by CNBC.
Previously, pre-tax contributions offered an immediate tax break, with income tax paid upon withdrawal in retirement. With the new rule, while investors will still only pay tax once, that single tax payment upon withdrawal for Roth contributions would be on the earnings, as the contributions themselves are made with after-tax dollars.
This means while there’s no upfront tax break for these specific catch-up contributions under the new rule, qualified withdrawals in retirement will be tax-free. However, the shift means a different approach to tax planning for high earners.