Starting in 2025, Americans age 50 and older earning more than $145,000 will lose a valuable tax break tied to their retirement savings. A major change in how catch-up contributions to 401(k) plans are handled could significantly impact how much these workers can save and how much they owe the IRS today.

Catch-Up Contributions: What’s Going Away?

If you’re 50 or older, you’re allowed to contribute more to your 401(k) than younger workers. For 2025, that extra amount is $7,500 on top of the $23,500 base limit. Workers aged 60 to 63 can go even further, with a temporary “super catch-up” of up to $11,250.

But there’s a catch: starting next year, high earners (those making more than $145,000 in wages at a single employer) will be required to make those extra contributions after-tax — meaning no more upfront deduction for that extra $7,500 or $11,250.

Translation? No more immediate tax break. That $11,250 super catch-up won’t reduce your taxable income anymore if you’re a high earner. In fact, it could increase it.

Why This Matters for High-Income Savers

Previously, catch-up contributions were a great way for older workers to lower their taxable income during peak earning years and beef up retirement savings. Now, for high earners, that money must go into a Roth 401(k) instead — where contributions are taxed upfront but grow tax-free.

That sounds fine if your plan offers a Roth option. But if it doesn’t? You won’t be allowed to make catch-up contributions at all.

Here’s what that could look like:

A 60-year-old in the 35% tax bracket who contributes the full $11,250 could lose a $3,938 tax deduction.
This higher adjusted gross income (AGI) could disqualify them from other tax benefits (like student loan interest deductions or state/local tax deductions).
It may even push them into a higher tax bracket, costing more overall.

Who Is Affected?

The rule applies to employees age 50 and up who earned more than $145,000 in wages from a single employer in the previous calendar year.

The income threshold is indexed to inflation. So for 2026, it may rise to around $150,000.
If you work for two employers, the threshold is applied separately at each.
New employees may avoid the rule in their first year or two since the lookback requires prior-year wages at the same company.
Self-employed high earners — such as consultants or business owners — are exempt if they don’t receive traditional “wages.” They can still make pre-tax catch-up contributions.

What If Your Plan Doesn’t Offer a Roth?

This is where things get messy.

Many plans still don’t offer a Roth 401(k) option, though more employers are scrambling to add it due to this new rule.

As of this year, 95% of Fidelity plans and 86% of Vanguard plans now offer a Roth 401(k).
Two years ago, those numbers were just 73% and 77%, respectively.

If your employer’s plan doesn’t offer Roth, and you’re above the income threshold, you’re completely blocked from making catch-up contributions.

But experts say this restriction is already forcing plan administrators to act. As complaints roll in from older, high-paid employees, more plans are expected to roll out Roth options before the deadline.

Why Roth Contributions May Still Be a Win

While most people love the upfront tax deduction of a traditional 401(k), the Roth version isn’t without benefits.

Contributions are taxed now, but withdrawals in retirement are tax-free.
Many high earners already have too much in pre-tax accounts, and may benefit from diversifying with more Roth savings.
For some, this rule is a forced opportunity to create tax-free income in retirement — especially if you expect tax rates to rise.

“Maybe it’s not just the catch-up that should be going to Roth — maybe it’s your entire 401(k),” said Joseph Perry, a CPA at CBIZ Advisors. “This is a chance to rethink your long-term tax strategy.”

Planning Ahead: What You Could Do Now

✅ Check Your 401(k) Plan Options
Find out if your employer offers a Roth 401(k). If not, push for one now.

✅ Look at Last Year’s Income
If you earned over $145,000 in 2024, expect to fall under the new rule in 2025.

✅ Evaluate Tax Impacts
Talk to your CPA or financial advisor to assess how losing this deduction could affect your overall tax picture and eligibility for other credits or deductions.

✅ Consider Roth Conversions
You may want to start building a tax-free bucket of retirement income. That could include Roth 401(k) contributions or converting existing IRA funds into Roth IRAs.

✅ Think Long Term
This rule is a big shift, but it doesn’t have to be a setback. For those who act strategically, it could be a powerful wealth-building tool over time.

Final Thoughts

This change rewrites the playbook for older, high-income retirement savers. The tax code is now nudging you toward Roth — whether you like it or not. But with the right strategy, this doesn’t have to be a loss.

In fact, it could be the push you needed to diversify your retirement savings and create more flexibility in retirement. Just don’t wait until January to make your move.