The IRS and U.S. Treasury have finalized rules clarifying key provisions of the Secure 2.0 Act of 2022, particularly around 401(k) and other retirement plan catch-up contributions for workers aged 50 and older.
Starting in 2027, employees earning more than $145,000 from their current employer in the prior year will generally be required to make catch-up contributions on an after-tax (Roth) basis instead of pretax. Some plans, however, may implement the change as early as 2026 if they interpret the rules in good faith, according to the IRS.
For now, eligible workers can still choose between pretax and Roth contributions, provided their workplace plan offers both options and their budget allows. This provision was included as a “pay-for” to help fund the Secure 2.0 legislation.
Roth contributions are made with after-tax dollars, but grow tax-free, while pretax contributions reduce your taxable income upfront, with ordinary income taxes due upon withdrawal. Deciding which route to take requires a careful look at your broader financial picture, especially since a higher adjusted gross income (AGI) can affect eligibility for other deductions.
“Now is the ideal time to consult your advisor or tax preparer and run multi-year tax projections,” said Patrick Huey, CFP and owner of Victory Independent Planning in Portland, Oregon. “This analysis can help you decide whether to accelerate pretax contributions through 2026 or begin the transition to Roth sooner.”
Catch-Up Contribution Limits and Participation
For 2025, employees can defer up to $23,500 into their 401(k), with an additional $7,500 catch-up contribution available for those 50 and older. Workers aged 60 to 63 may qualify for a “super catch-up” of $11,250.
Despite the availability, only 16% of eligible workers made catch-up contributions in 2024, according to a 2025 Vanguard report covering 1,400 plans and nearly 5 million participants. Most participants had incomes exceeding $150,000.
Choosing between Roth and pretax contributions depends on multiple factors, including current and projected future tax brackets, experts note. The main message: don’t wait on the sidelines. “With these new rules, taking timely action is critical,” said Jared Gagne, CFP and assistant VP at Claro Advisors in Boston.