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Are You Over 50 and Earning More Than $150,000? This New Retirement Rule Deserves a Closer Look

A lot of mid-year tax planning advice is fairly generic: check your withholding, maybe realize a loss somewhere. Useful, but not exactly specific to you.

Here's something that is. Since January 1, 2026, a new rule has quietly changed how part of retirement savings gets contributed for a specific group: employees 50 and older earning more than $150,000. If that's you, it's worth understanding both the immediate tax impact and the planning door it may have opened.

The rule, in plain terms

Employees age 50+ who earned more than $150,000 in FICA wages from their employer in 2025 can no longer direct catch-up contributions to a 401(k), 403(b), or governmental 457(b) plan on a pre-tax basis. Those dollars now have to go in as Roth instead.

A few specifics that matter:

  • The $150,000 threshold only counts wages from your current employer. Self-employment income, investment income, and a spouse's earnings don't factor in.

  • It applies to both the standard catch-up contribution and the enhanced catch-up available to those age 60 to 63.

  • The IRS is allowing a good-faith compliance standard through 2026 while employers finish rolling this out on their end.

Who should actually pay attention

This is worth a closer look if you can check most of these boxes:

  • You're 50 or older

  • You earned more than $150,000 from your employer in 2025

  • You're contributing at or near the max to your retirement plan

  • You haven't looked at your payroll elections yet this year

If that's you, the review is worth doing before year-end, not after next spring's return has already been filed.

What this looks like for a real person

Take a 61-year-old CRNA earning $240,000 a year through a hospital system. For years, she's maxed out her 403(b), including catch-up contributions, entirely pre-tax.

As of this year, those catch-up dollars are automatically rerouted to the Roth side of her plan instead. Taken at face value, that's just a smaller deduction. But it puts a handful of real decisions on the table that are easy to put off if no one raises them:

  • Should withholding go up to avoid a surprise balance next April?

  • Is this actually a good moment to lean further into Roth savings while she's still working?

  • Would a partial Roth conversion make sense this year?

  • How does more Roth exposure change the picture for retirement income and future RMDs?

That's the part most people miss. The rule change itself is a payroll detail. The real decisions are in what it opens up: withholding, Roth planning, and future RMDs.

Why this is bigger than a payroll change

Your tax bill this year may go up. Roth contributions are after-tax, so affected employees lose part of the deduction they were counting on. That can mean higher taxable income, a bigger balance due in April, or a withholding shortfall nobody caught in time.

It can also surface a bigger planning opportunity. Many high earners have built most of their retirement savings pre-tax, simply because the deduction was attractive. Being pushed into Roth contributions can, if you plan around it, mean more flexibility later: more control over future tax brackets, less dependence on taxable IRA withdrawals, and more room to manage RMDs down the road.

The rule itself isn't good or bad. What matters is whether it prompts a planning conversation, or just a slightly smaller refund.

The mistake we see coming

Most people won't catch this by reviewing their retirement plan elections. They'll notice it because next year's tax return looks different than expected. Payroll portals go unchecked for months. If a plan uses spillover or automatic Roth features, the change may already be underway without an employee realizing it.

By the time it shows up on a return, most of the useful planning window has closed.

What to do this summer

  • Confirm whether you crossed the $150,000 wage threshold with your current employer in 2025

  • Check how your catch-up contributions are actually being deposited

  • Revisit whether your withholding still makes sense

  • Decide whether this is a good moment to build out a broader Roth strategy

  • Update retirement income projections if this changes your savings mix meaningfully

Worth a conversation

Two people affected by the same rule can end up in very different places. One pays a bit more tax this year and moves on. The other uses it as the occasion to build more flexibility into their retirement plan for the next twenty years.

The difference isn't the rule. It's whether someone takes the time to plan around it.

If you're a physician, executive, business owner, or other high-income professional approaching retirement, this is a good time to have that conversation. Schedule a planning review with us today.

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