Saving in a 401(k) in 2026? You May Not Get the Tax Break You're Expecting.

If you're going to save for retirement, it generally makes sense to do so in a tax-advantaged account. That way, you can shave down your IRS bill in some shape or form in the course of building up a nest egg.

Of course, this doesn't necessarily mean you should keep all of your retirement savings in a tax-advantaged account. IRAs and 401(k)s impose penalties for taking withdrawals prior to age 59 and 1/2. So if early retirement is on your radar, you may want to turn to a taxable brokerage account for at least a portion of your nest egg.

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Otherwise, you might as well enjoy the benefits 401(k)s and IRAs offer. And if you're in a higher tax bracket, you may be inclined to save for retirement in a traditional 401(k) or IRA.

With a traditional retirement plan, your money goes in on a pre-tax basis. Investments in these accounts then get to enjoy tax-deferred growth, and withdrawals are subject to taxes.

In 2026, the contribution limits for 401(k)s is increasing. And if you're 50 or older, you may want to take advantage of 401(k) catch-ups.

But there's a new rule coming to 401(k) catch-up contributions this year that affects higher earners. And it may also have an impact on your taxes.

How 401(k) plans are changing in 2026

This year, 401(k) contribution limits are increasing compared to 2025. Savers under age 50 will be able to contribute up to $24,500, while those 50 and over can make an $8,000 catch-up for a total contribution of $32,500.

There's also a special super catch-up contribution available to savers specifically between the ages of 60 and 63. That super catch-up is worth $11,250, and it replaces the general $8,000 catch-up for savers 50 and over.

But it's not just that 401(k) contribution limits are changing in 2026. The rules for catch-up contributions are changing for higher earners.

Catch-up contribution rules are changing for higher earners

Until this year, savers 50 and over could make a 401(k) catch-up in either a traditional workplace plan or a Roth 401(k) plan. Starting this year, the only option for higher earners is to make a catch-up Roth style.

If you earned $150,000 or more in 2025, you'll be limited to a Roth 401(k) in 2026 if you want to make catch-up contributions. That could be a problem, though, if your workplace 401(k) doesn't have a Roth option.

It could also have a negative impact on your taxes. If you were counting on making your catch-up contribution in a traditional 401(k), you'll be losing the up-front tax break on that money.

That doesn't mean you won't get to enjoy other benefits. Roth 401(k)s offer tax-free gains on your investments and tax-free withdrawals. They also don't force you to take required minimum distributions, giving you more freedom with how you manage your savings later on.

But it's important to understand how the rules for catch-up contributions are changing. That way, you can work with a tax planner as needed to make adjustments.

Remember, too, that the new rules for higher earners apply to catch-up contributions only. If you're in that category, you can still make your regular $24,500 contribution to your 401(k) on a pre-tax basis if you so choose. But you may actually want to consider making your entire 401(k) contribution Roth-style if you can manage it from a tax perspective.

Having more of your savings available to you tax-free in retirement could end up being a huge deal, especially if tax rates rise in the future. We don't know whether that'll happen, but the more savings you have in a Roth, the more protection you get.

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