Many workers in Southern California rely on 401(k) contributions to build long-term retirement security, and “catch-up” contributions are a key tool once you reach age 50. Catch-ups allow you to contribute above the standard annual deferral limit if your employer plan permits them. For 2024, the IRS lists a $7,500 catch-up amount for many plans, and the regular elective deferral limit is $23,000, though limits can change year to year. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions

A significant change under federal law affects how catch-up contributions are treated for certain higher earners, but the timing matters. The SECURE 2.0 catch-up rule requires catch-up amounts to be treated as Roth for employees whose wages from the employer sponsoring the plan exceeded a specified threshold in the prior year. Treasury and the IRS have finalized rules implementing this requirement, and the effective date has been delayed so the Roth requirement applies starting in 2026 rather than 2024. https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-on-new-roth-catch-up-rule-other-secure-2point0-act-provisions

The threshold is commonly described as a $145,000 wage threshold, and it is based on FICA wages paid by the employer sponsoring the plan in the prior year, not household income. If you exceed the threshold, the law generally pushes your catch-up amounts into Roth treatment, meaning they are after-tax contributions that do not reduce current taxable income. This is where many people notice the difference: pretax catch-up contributions may no longer be available for those over the threshold, depending on how the plan is administered. The specific mechanics can vary by plan design, so the practical experience may differ from one workplace to another.

It also helps to separate the rule from the broader “Roth versus traditional” question. Roth catch-up contributions are taxed now, but qualified withdrawals in retirement are generally tax-free, assuming the rules for Roth accounts are met. By contrast, traditional 401(k) amounts generally reduce taxable income in the year of contribution, but withdrawals are typically taxable later. The right balance depends on your projected income, anticipated retirement bracket, and how your overall estate plan coordinates with retirement assets, which is why many families treat this as part of a larger planning conversation rather than a single yes-or-no decision.

From an administrative standpoint, employers and plan providers must be able to accept Roth contributions for affected participants. If a plan does not offer a Roth 401(k) option, the final regulations discuss how that can affect the ability of certain employees to make catch-up contributions at all, which has made plan sponsor updates a major focus for 2025 implementation work. This is also why it is important to check your plan's payroll and contribution settings well before year-end, particularly if you are close to the regular deferral limit and rely on catch-ups to reach your annual savings goal.

If you are assessing how this affects you, focus on a few practical questions: whether your prior-year wages from the employer are likely to exceed the threshold, whether your plan currently supports Roth catch-ups, and whether your withholding or estimated taxes should be adjusted to reflect the loss of a current-year deduction. This article is general information, not legal advice. For those who want the underlying statutory framework, Cornell Law provides a plain reading source for the Code section governing catch-up contributions. https://www.law.cornell.edu/uscode/text/26/414

Key takeaways

• Starting in 2026, higher earners may be required to make catch-up amounts as Roth rather than pre-tax, depending on employer wages and plan design.
• The wage threshold is based on prior-year wages from the employer sponsoring the plan, not household income.
• Confirm your plan's Roth functionality early so catch-up contributions are not disrupted.

If you want to coordinate this change with your broader retirement and estate planning goals, Westlake Law Group can help you identify planning questions to raise with your tax and financial advisors. Call Westlake Law Group at (818) 444-2022. 30699 Russell Ranch Road, North Building, Suite 210, Westlake Village, California. Virtual consultations are available throughout Southern California.