401(k) Rules Are Changing for Higher Earners in 2026. Here's What You Need to Know.

One really nice thing about 401(k) plans is that they come with significantly higher annual contribution limits than IRAs. That allows you to save a big chunk of money for retirement in a tax-advantaged manner.

Of course, not everyone can take advantage of those generous 401(k) plan limits. If you only earn $50,000 a year, for example, you're probably not maxing out a 401(k). But with a higher salary, maxing out a 401(k) becomes much more doable.

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In 2026, 401(k) rules are changing for higher earners. Here's what you need to know if you fit that category.

401(k) contribution limits are changing

Before we get into a big 401(k) change for higher earners that's coming in 2026, let's review what maxing out one of these workplace plans will look like in the new year.

If you're under 50, your maximum 401(k) contribution for 2026 is $24,500, up from $23,500 in 2025. If you're 50 or older, your new 401(k) catch-up limit for 2026 is $8,000, up from $7,500 in 2025. This means that if you're 50 or older next year, your total allowable 401(k) contribution is $32,500.

There's an exception, however, for savers specifically between ages 60 and 63. If you fall into that age range, your 401(k) catch-up for 2026 maxes out at $11,250, bringing your total allowable contribution to $35,750.

Higher earners may have to do catch-ups a new way

If you earn an average wage and are 50 or older, you're probably not making plans to put the maximum $32,500 (or, depending on your age $35,750) into a 401(k) plan in 2026. But if your income is such that you can afford to max out, it certainly pays to do so.

However, you should know that next year, you won't be able to make a traditional 401(k) catch-up if your 2025 income exceeds $145,000. In that case, your only option for doing a catch-up will be to make it in a Roth 401(k).

To be clear, though, you can still make your regular $24,500 contribution to a traditional 401(k). It's only the catch-up portion that has to go in on an after-tax basis.

A change that's really not such a raw deal

If you're a higher earner, one big benefit of saving for retirement in a traditional 401(k) -- including your catch-up -- is shielding income from taxes. With a Roth 401(k), you don't get to do that. So if you decide to make a Roth catch-up next year, that money will go in on an after-tax basis.

That doesn't mean you shouldn't still plan to make that catch-up, though. That's because Roth 401(k)s offer a number of benefits that may come in very handy later in life especially.

First, your money gets to grow completely tax-free. Your withdrawals in retirement will also be tax-free. And Roth accounts, including both IRAs and 401(k)s, give you complete control over when you withdraw your money. They don't force savers to take required minimum distributions like traditional retirement plans do.

Of course, one snag you might hit is your employer not offering a Roth version of its 401(k). In that case, catch-up contributions may be off the table for you.

Thankfully, though, a lot of companies with 401(k)s have adopted the Roth savings feature over time. And if you plan gives you that option, you shouldn't be too quick to write it off.

Remember, having some tax diversification in retirement is a good thing. So if you've been saving in a traditional retirement account thus far, it's definitely not a bad idea to make some of your senior income available tax-free.

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