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Some Americans will lose popular 401(k) tax break in major retirement rule change starting 2026

IRS
By Allison Monacelli

Starting in 2026, a key retirement savings perk will change for high-income earners.

Under new IRS regulations from the SECURE 2.0 Act, workers who earned $145,000 or more in the previous year must make all 401(k) catch-up contributions to Roth accounts instead of traditional pre-tax accounts. That means these workers will lose the upfront tax deduction they currently get for making before-tax contributions.

Until the rule takes effect, employees aged 50 and older can still choose between traditional or Roth 401(k) options. For 2025, the catch-up contribution limit is $7,500 for workers over 50, on top of the standard $23,500 limit, and $11,250 for those aged 60 to 63.

Employers without a Roth 401(k) option will need to add one, or their high-earning employees may not be able to make catch-up contributions at all. The good news is that Roth options are becoming more common, with 95% of Fidelity and 86% of Vanguard 401(k) plans now offering them.

While traditional 401(k)s provide a tax break now but tax withdrawals later, Roth accounts grow tax free and allow tax free withdrawals in retirement.

For more information see Eric Revell “Some Americans will lose popular 401(k) tax break in major retirement rule change starting 2026,” Fox Business, October 10, 2025.