One of the biggest retirement savings benefits for workers aged 50 and older in their 401(k) is at risk
Here’s all you need to know about the biggest retirement savings benefits for workers aged 50 and older.
Starting in 2026, the situation regarding the U.S. retirement payment plan is poised for a significant shift, one that will particularly affect older, high-earning workers.
Under incoming changes to the tax code, those age 50 and over who earn above a certain threshold will no longer be able to keep hold of “catch-up” contributions to their 401(k) plans. Instead, they will be forced to pay the taxes upfront, rather than deferring them until retirement.
Money.com explains that “the change was originally supposed to go into effect in 2024, but the IRS delayed the rule, due in part to requests from employers and plan sponsors who said they needed time to prepare for the change.” It adds that while the official start date is 1 January 2026, that could be pushed back to 2027 “to give employers some flexibility next year.”
The latest 401k data was released
— Barbell Financial 💪🏻💰 (@BarbellFi) October 1, 2025
Here’s the median balance by age:
18-34: $39k
35-44: $135k
45-54: $246k
55-64: $364k
65-74: $410k
Over 75: $335k
Not Halloween yet but this is scary 😳
Currently, Americans aged 50 and older are allowed to contribute extra funding above the standard 401(k) limit. These are known as “catch-up” contributions, and they form part of their retirement plans on a pre-tax basis.
That means these contributions lower taxable income immediately, and taxes are paid later when the funds are withdrawn. However, those making above $145,000 in prior-year wages must switch to Roth treatment for their catch-up dollars.
This new rule does not apply uniformly to everyone across the board. The threshold is applied by the employer and is measured using prior-year wages. That means that it’s possible that someone with two jobs may still qualify for traditional catch-up contributions at the lower-paying employer. As well as that, self-employed individuals who don’t receive traditional W-2 wages are currently excluded from the rule.
The rule also introduces a potential hardship for those whose 401(k) plans do not offer a Roth option. In such cases, eligible high earners will be blocked entirely from making catch-up contributions.
Speaking to USA Today, Isaac Bradley, director of financial planning at HB Wealth, said: “Maybe this is bad, but maybe not. It depends on where you think your tax rate will be.”
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