Bonus Retirement Contributions Are Changing in 2026

• Feb 03, 2026 wisecpa

Bonus Retirement Contributions Are Changing in 2026: What You Need to Know If You’re 50+

If you’re over 50 and earning a higher income, an important retirement planning change is coming your way—and it could impact how you save for the future.

As part of the SECURE 2.0 Act, new rules take effect in 2026 that change how certain “catch-up” retirement contributions are taxed. At Wise Business Solutions, we work closely with small business owners and professionals throughout Wilmington, Delaware to help them understand how tax law changes affect their long-term financial plans.

Let’s break this down in plain English.

What Are Catch-Up Contributions?

Most retirement plans allow individuals aged 50 and over to make additional retirement contributions beyond standard limits. These are called catch-up contributions, designed to help people boost savings as they approach retirement.

For 2025, the catch-up limit is:

• 401(k): $7,500

Traditionally, these contributions could be made on a tax-deferred basis—meaning you didn’t pay income tax on the money until you withdrew it in retirement.

That’s about to change for some earners.

What’s New in 2026?

Beginning in 2026, individuals who earn $145,000 or more (based on prior-year wages) will no longer be able to make tax-deferred catch-up contributions.

Instead:

• Catch-up contributions must be made to a Roth 401(k)

• Contributions will be after-tax

• Qualified withdrawals in retirement will be tax-free

This rule was originally set to begin in 2024 but was delayed to give employers and plan administrators time to update their systems.

The Pros and Cons

The Good News

• Roth contributions grow tax-free

• Withdrawals in retirement are not taxed

• This can be a powerful long-term planning tool

The Challenges

• You’ll pay income tax on contributions now

• If your employer does not offer a Roth 401(k), you may not be able to make catch-up contributions at all

• Planning becomes more important to avoid surprise tax impacts

This is especially relevant for small business owners and executives who are already managing multiple income streams.

What Should You Do Now?

At Wise Business Solutions, our small business accounting clients often ask how to stay proactive instead of reactive. Here are the next steps we recommend:

1. Determine if this change applies to you
   Review your income levels and age to see if you’ll be impacted in 2026.

2. Confirm whether your employer offers a Roth 401(k)
   This determines whether catch-up contributions remain an option.

3. Adjust your contribution strategy
   You may need to plan for additional taxable income—or reconsider contribution levels altogether.

How Wise Business Solutions Can Help

Tax law changes don’t happen in isolation—they affect cash flow, retirement planning, and overall business strategy. Our team specializes in small business accounting and Wilmington, Delaware accounting services, helping clients navigate complex changes with clarity and confidence.

If you’re unsure how this rule affects your personal or business finances, now is the time to plan—not wait until 2026.

📌 Need help reviewing your retirement or tax strategy?
Wise Business Solutions is here to help you stay compliant, strategic, and prepared.