Piggy-backing off last week’s successful video on Year-End Strategies, this week, we are talking about recent changes to your Catch-Up Contributions. Some of which effect 2025 into 2026 and beyond. And here to take you through the changes are none other than the dynamic 401(k) duo of Kristine and Rachel.

In their short video, they’ll take you through the recent changes, who’s impacted, who benefits from it, and how you can position yourself to potentially gain from these changes.

They keep it fun, they keep it succinct, and before you know it, you’ve just learned a thing or two. 

Thank you, have a wonderful weekend. Reach out if we can help answer any questions.

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Did you know that Stiles Financial Services was recognized as a 2025 Newsweek® Top Financial Advisory Firm in the United States?!  And we have you, our clients, to thank!

FFR 268 – 2026 Catch-Up Contribution Changes

KRISTINE: Hi everyone, thanks for joining us for another Financial Flash.  This week, we’re upgrading and making it a double. That’s right, I’ve got my 401(k) teammate with me, Rachel and together, we’ll be discussing a recent change to 2026 – 401(k) contributions.

With the success of Bradford’s, year-end financial plan considerations, we are here to give you an update on the new changes to the 2026 “Catch-Up” contributions and explain what that means for you.

First, a quick refresher. If you’re age 50 or older, the IRS lets you put extra money into your 401(k), 403(b), or governmental 457(b) plan on top of the regular annual limit. For 2026, the base contribution limit is $24,500, up from $23,500. For those Catch-up Eligible, you can contribute an additional $8,000. Unless you are going to be the ages of 60, 61, 62, or 63 on the last day of the year. For those four years, your limit is $11,250 over the base. That “enhanced catch-up” was new in 2025.

RACHEL: Up until now, if your plan offered both traditional and Roth options, you could choose to make those catch-up dollars either pre-tax, Roth, or a mix of the two. Starting January 1, 2026, that choice will change for higher-income earners because of a provision included in SECURE 2.0 Act.

Here’s the key rule in plain English:

• If you are age 50 or older as of 12/31/26,
• And your W-2 wages with your current employer were more than $150,000 in 2025
• Then all of your catch-up contributions in 2026 and beyond must be made as Roth contributions—that is, after-tax.

KRISTINE: So for example, if in 2025 you earn more than $150,000 in Social Security wages from this employer, any catch-up contributions you make in 2026 will have to go into the Roth side of the plan. You’ll pay tax on that money now, but qualified withdrawals in retirement can be tax-free.

It’s important to note a few things this rule doesn’t do:

• It does not take away your ability to make regular pre-tax contributions up to the standard annual limit.
• It does not affect people under age 50, or those whose wages are at or below the $150,000 threshold with their current employer.

For some, this change may feel like a tax increase, because you’ll lose the immediate deduction on those extra dollars. But there can be real advantages:

• Roth catch-ups can help diversify your tax picture in retirement—having both pre-tax and Roth money gives you more flexibility later.
• Paying tax now could make sense if you expect to be in the same or a higher tax bracket in retirement.

RACHEL: What should you do next?

1. Know which side you’re on. Pay attention to your W-2 wages for 2025—that will determine whether your 2026 catch-ups must be Roth.
2. Review your plan document. You should receive a summary plan description from your employer outlining your company’s plan, including catch-ups.
3. Evaluate your savings strategy. Think about how much you’re contributing now, and whether it makes sense to adjust your mix of pre-tax and Roth.
4. Ask questions. This is a rule that affects a wide group, but your situation is personal—your age, income, taxes, and retirement timeline all matter. Your HR specialist and plan provider can help you navigate your plan, but we are here to help too.

Our goal is to help you keep maximizing your retirement savings while understanding how the rules are changing. If you’re 50 or older—or getting close—and you’d like to see how this mandatory Roth catch-up rule affects you, please reach out. We’re here to walk through the numbers, explain your options, and help you turn this change into an opportunity, not a setback.

Kristine: our team at Stiles is here to make sure you understand your options, whether you’re a plan participant or business owner, our plan administrator is rolling out this new change for 2026. Be sure to reach out or visit our website to learn more. Thank you for joining us today, we look forward to seeing you again, next week, on our next Financial Flash. Bye now.