Good Morning,
I hope this note finds you well and enjoying these lovely, early fall days.
I wanted to share an important update about new 401(k)/403(b) contribution rules that may affect how you save, especially if you’re 50 or older. Two key changes are coming: the “super catch-up” contribution and a new rule requiring certain catch-ups to go into Roth 401(k) accounts.
First, the “super catch-up.” Starting in 2025, anyone between the ages of 60 and 63 will be allowed to make an extra-large catch-up contribution to their 401(k)/403(b). In plain terms, people in that age group will be able to contribute a few thousand dollars more than the standard catch-up amount that applies to those age 50 and older. This rule gives people approaching retirement a short window to boost their savings in a meaningful way. In typical IRS fashion, this is much more complicated than it needs to be so here is a simplified example:
The amount you can contribute as a super catch-up is the greater of:
$10,000, or
150% of the regular catch-up limit that applies to those age 50 and older.
For example:
The standard 401(k)/403(b) catch-up limit for anyone 50 and over is $7,500.
The super catch-up would be $11,250 (which is 150% of $7,500).
In practical terms, someone age 60–63 could contribute around $11,000 on top of the regular deferral limit. Once you turn 64, you revert back to the standard age 50+ catch-up amount (currently $7500).
Next, the Roth 401(k) rule. Beginning in 2026, if your gross wages from your employer are more than $145,000 (as shown on your W-2 from the prior year), any catch-up contributions you make will need to go into a Roth 401(k) rather than your traditional pre-tax 401(k). This means those contributions will be made after taxes, but the money can grow and be withdrawn tax-free in retirement.
There are some pros and cons to these new rules.
On the positive side, the super catch-up allows people nearing retirement to save more, and the Roth rule helps build tax-free income for the future. Having both pre-tax and Roth money in retirement can create more flexibility for managing taxable income later on.
The downside is that the Roth requirement means higher earners will no longer get a current-year tax deduction on their catch-up contributions. This could slightly increase your tax bill in the years you make them. It’s also important to note that your employer must offer a Roth 401(k) option for you to take advantage of this rule, so some plans may need to make updates before 2026.
As always, the best approach depends on your personal situation, your income, tax bracket, and retirement timeline all play a role. For many, combining both pre-tax and Roth contributions offers the best balance of tax savings now and flexibility later.
If you’re approaching age 60 or earn close to the income threshold, I encourage you to reach out. We can review your 401(k)/403(b) contribution strategy and determine how to take full advantage of these changes.
Warm regards,
Johanna