Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
High Earners Age 50 and Older Are About to Lose 'Catch-Up' privileges in 401Ks
I know this can be a 'good problem' for many, but the meta is clear: the IRS restricting 'catchup' contributions for older workers who can afford to do so is one more shift towards the government creating an uncomfortable retirement for many as costs continue to rise everywhere.
The 'catch-up' is lost only by those over 50 who earn > $145K (per employer), at least for now.
But it's a horrible signal that the IRS is looking to restrict retirement savings. The govt is so wasteful in its spending and this is simply not an area to be targeted.
Stuff like this is another reason I'm glad nearly all of my retirement assets are in taxable accounts .. i don't need to worry about playing these games, planning withdrawls, dealing with RMDs down the road. Keeps things rather simple.
The IRS had little to do with this other than restate what Congress required. Give credit where credit is due.
SECURE 2.0 introduced two notable changes to this system:
mandatory Roth treatment for catch-up contributions by high earners for taxable years beginning after Dec. 31, 2023 optional "super catch-up" contributions for participants ages 60 to 63 for taxable years beginning after Dec. 31, 2024
As a practical matter, the executive branch does have limited discretion in carrying out what Congress says, especially in making sure that the law can actually be executed:
Due to concerns that plan sponsors and recordkeepers would be unable to comply with the mandatory Roth catch-up requirement by the original deadline, Notice 2023-62 provided a transition period that delayed the effective date until Jan. 1, 2026 (although, a later effective date may apply for collectively bargained plans).
Even Congress isn't restricting retirement savings; see e.g. rforno's post above. What Congress has always done is to restrain the government's largesse by limiting contributions. That's far and away the larger restriction. And with its new "super catch up" provision, Congress is enabling earners to shelter of another $11K of assets that would otherwise sit in taxable accounts.
Still, not to worry if you're a really high earner (read business partner). Congress continues to give them favorable tax treatment on profit sharing (carried interest) and even on catch up contributions:
No FICA Wages, No Roth Mandate. Participants without FICA wages (e.g., partners who have only self-employment income) are not subject to the Roth requirement.
Comments
But it's a horrible signal that the IRS is looking to restrict retirement savings. The govt is so wasteful in its spending and this is simply not an area to be targeted.
There is no excuse for this.
From 2026, all catchups above the threshold at a single job must go into Roth 401k. So, below the threshold, catchups can go to 401k or Roth 401k.
Threshold used is for income in the prior year & are inflation-adjusted: $145K (2025), $150K (2026 est)
If Roth 401k isn’t available, then one is out of luck – complain to HR.
Catchup for 50+ is $7,500 (2025), $8,000 (2026 est).
Super Catchup for 60-63 is $11,250 (2025, 2026 est). It’s about 150% of the regular catchup amount.
Relevant age is for the DOB in the applicable calendar year.
Estimates will have to be confirmed by IRS later.
403b rules are similar to 401k, but there is also a limited 15-yr catchup.
Catchup for IRA & HSA is $1K. These have their own income limits.
IRS Final Rules, 9/15/25
https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-on-new-roth-catch-up-rule-other-secure-2point0-act-provisions
(LONG) https://www.federalregister.gov/documents/2025/09/16/2025-17865/catch-up-contributions
Some IRS links in 09/2025 show rules only for 2025, not for 2026.
Other Sources
https://www.wsj.com/personal-finance/retirement/high-earners-age-50-and-older-are-about-to-lose-a-major-401-k-tax-break-75572091?mod=hp_lead_pos11
https://www.fidelity.com/viewpoints/retirement/catch-up-contributions
The IRS had little to do with this other than restate what Congress required. Give credit where credit is due. https://www.hklaw.com/en/insights/publications/2025/05/irs-proposes-key-changes-to-roth-catch-up-contributions
As a practical matter, the executive branch does have limited discretion in carrying out what Congress says, especially in making sure that the law can actually be executed: Even Congress isn't restricting retirement savings; see e.g. rforno's post above. What Congress has always done is to restrain the government's largesse by limiting contributions. That's far and away the larger restriction. And with its new "super catch up" provision, Congress is enabling earners to shelter of another $11K of assets that would otherwise sit in taxable accounts.
Still, not to worry if you're a really high earner (read business partner). Congress continues to give them favorable tax treatment on profit sharing (carried interest) and even on catch up contributions: