Older Workers Are Losing a Tax Break in 2026 -- but Gaining an Opportunity

Core Insights - Many individuals face challenges in saving adequately for retirement at different life stages, often due to financial burdens such as student debt, home purchases, and childcare costs [1] Group 1: Catch-Up Contributions - Individuals aged 50 and older can make catch-up contributions to their retirement accounts, which are not limited by the amount already saved [2] - Starting in 2026, a significant change will occur regarding catch-up contributions, particularly affecting higher earners [3][5] Group 2: New Rules in 2026 - Currently, workers under 50 can contribute up to $23,500 to a 401(k), while those 50 and over can contribute a total of $31,000, including a catch-up contribution of $7,500 [4] - From 2026, individuals earning over $145,000 will only be allowed to make catch-up contributions using after-tax dollars, which may initially seem disadvantageous [5][6] Group 3: Benefits of Roth Contributions - Despite the perceived drawbacks of mandatory after-tax contributions, there are significant benefits to having funds in a Roth 401(k), including tax-free investment gains and tax-free withdrawals in retirement [8] - This structure provides greater flexibility in managing tax liabilities during retirement compared to traditional 401(k) accounts [8]