If you're a high-earning executive or professional, two of the most significant 401k rule changes in the last two decades just went into effect, and they're going to impact your 2025 and 2026 tax bills in very different ways.
One change opens up a major new savings opportunity. The other? It forces you to pay thousands more in taxes, whether you like it or not.
The key is understanding how these two rules intersect and what you need to do right now to stay ahead on your payroll system.
The Good News: Super Catch-Up Contributions (2025)
Thanks to the SECURE Act 2.0, there's a brand new "super catch-up" contribution available for a specific age group starting in 2025.
If you're between the ages of 60 and 63, and your employer's plan has adopted this feature (many have), you can contribute significantly more than the standard catch-up amount.
This is actually a sensible piece of legislation. Age 60-63 is typically when:
- Your kids finish college
- Your income hits its peak
- You finally have extra cash flow to maximize retirement savings
That's a lot of extra savings capacity—and if you can max it out, you absolutely should. If you're a Quarry Hill client, we're already watching to see if this option becomes available for you.
The Bad News: The 2026 Mandatory Roth Rule
Now let's talk about the second change - the one that's going to increase your tax bill.
First, a quick refresher on Roth contributions: With Roth, you pay taxes upfront when you contribute, then withdraw the money tax-free in retirement. Most people love this because they know their retirement accounts will be tax-free.
However, if you're in your peak earning years, paying taxes upfront hurts. You're probably in the highest tax bracket you'll ever be in, so you're paying more in taxes now to get tax-free withdrawals later when you'll likely be in a lower bracket anyway.
This is actually a clever way the government is extracting more tax revenue without technically raising tax rates.
Here's the rule: Starting January 1, 2026, if you're a high earner, you'll be forced to make ALL of your 401k catch-up contributions on an after-tax Roth basis, whether you want to or not.
This eliminates the traditional pre-tax catch-up option for a massive group of high earners. It's not optional, and for many people, it will mean thousands of additional taxes starting in 2026.
Who Does This Affect?
The mandatory Roth rule affects you if you meet ALL three of these criteria:
- You're 50 or older and eligible for catch-up contributions
- Your FICA wages exceeded $150,000 in the prior year (that's the threshold for 2026, based on what you earned in 2025)
- Your employer offers catch-up contributions (which most do)
Important detail: This is based on your FICA (Social Security) wages, not your total income. You can find this number in Box 3 of your W-2.
Remember: If you have a large bonus or equity grant that vests in 2025, that could push you over the $150,000 line and subject you to this mandatory Roth rule for all of 2026.
The $150,000 Cliff
Here's something crucial: this is a cliff, not a slope.
- Earn $150,001? You MUST do Roth catch-up contributions.
- Earn $149,999? You can still do traditional pre-tax.
One dollar makes all the difference.
If you have any control over your income timing and you're right at that $150,000 threshold, you might want to keep a very close eye on it.
Planning nuance: This rule applies separately per employer. For those rare individuals with two or more unrelated jobs where neither employer pays you more than $150,000 individually, the Roth mandate doesn't apply—even if your total income is much higher.
When Super Catch-Up Meets Mandatory Roth
The super catch-up feature continues in 2026, but the mandatory Roth rule hits it directly.
.png?width=1280&height=720&name=2026%20Retirement%20Shocker%20Video%20Slides%20(1).png)
But here's the problem: If you're a high earner making over $150,000 in wages and you want to use that full super catch-up, the entire catch-up portion ($11,250) must be made on a Roth basis.
And if you have the money to max out the super catch-up, you're probably in a high tax bracket.
Tax impact example: For someone in the 32% federal tax bracket, that $11,250 Roth contribution means paying an extra $3,600 in federal taxes (plus state taxes) just to access the benefit.
Is it still worth maxing out? Absolutely; it's still probably your best retirement savings option. Just don't expect the tax deduction you're used to, and make sure you budget for the extra tax bill.
Your Employer Might Not Be Ready
Here's one more caveat: Not all employers are prepared for this change.
The 2026 mandatory Roth rule is an administrative nightmare that's forcing companies to figure out how to:
- Track employees' prior-year FICA wages (which they might not readily know)
- Set up separate Roth election systems
- Update payroll systems to handle the split between regular and catch-up contributions
Some companies are considering three options:
- Require separate elections for catch-up contributions
- Automatically convert all catch-up to Roth
- Eliminate catch-up contributions entirely because the administrative burden is too high
We're right at the end of the year, and many HR departments are scrambling to implement these changes.
What This Means for Your Retirement Strategy
The reality is that tax planning just became even more critical for high earners.
Here's what you need to consider:
- Budget for extra taxes: If you plan to max out your catch-up contributions in 2026, you'll need extra cash to cover the tax bill.
- Income timing matters: If you're close to the $150,000 threshold, explore whether you can time bonuses or variable compensation to stay below the limit (if that aligns with your overall strategy).
- Roth vs. traditional analysis: Work with your advisor to model where you are in the tax brackets now versus where you'll be in retirement. Depending on your situation, you may want to lean even harder into Roth contributions.
Action Steps You Need to Take Right Now
- Check your 2025 FICA wages when you receive your W-2 at year-end. See if you exceeded $150,000.
- Talk to HR immediately. Don't wait until 2026. Ask them:
- How they plan to implement the mandatory Roth rule
- Whether they'll offer catch-up contributions at all
- What elections you'll need to make
- Model the tax impact. Work with your financial advisor or tax professional to:
- Calculate how much extra you'll pay in taxes
- Ensure you have enough cash flow to cover the bill
- Determine if the Roth treatment actually benefits your long-term plan
If you're working with Quarry Hill Advisors, don't worry—we're already monitoring these changes for our clients and will proactively help you navigate them.
The Bottom Line
These two rule changes (the super catch-up opportunity and the mandatory Roth conversion) represent some of the most significant shifts in 401k policy we've seen in decades.
For high earners, the message is clear: You can save more than ever before, but you'll pay more in taxes to do it.
The winners will be those who plan ahead, understand the nuances, and work with their advisors to optimize their strategy before the 2026 deadline hits.
Ready to find out if we're the right fit for your financial planning needs? Schedule a complimentary discovery meeting where we'll provide a real assessment of how we can help your specific financial situation.
-A note from Bjorn Amundson, CFP®
This material is intended for educational purposes only. You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. Nothing contained in the material constitutes a recommendation for purchase or sale of any security, investment advisory services or tax advice. The information and opinions expressed in the linked articles are from third parties, and while they are deemed reliable, we cannot guarantee their accuracy.
