Key Topics Covered

The Big Change

Starting January 1, 2026, workers earning over $145,000 must make catch-up contributions to Roth 401(k) accounts only
No more pre-tax catch-up contributions for high earners
This applies to anyone 50+ who earned more than $145,000 from their employer in the previous year

Understanding Catch-Up Contributions

Standard 401(k) contribution limit in 2025: $23,500
Catch-up contributions for age 50+: Additional $7,500
Enhanced catch-up for ages 60-63: Additional $11,250
These limits will continue to increase with inflation

Traditional vs. Roth 401(k) Explained

Traditional 401(k): Pre-tax contributions, immediate tax break, taxed upon withdrawal in retirement
Roth 401(k): After-tax contributions, no immediate tax break, tax-free withdrawals in retirement
The key difference: timing of when you pay taxes

Impact on Your Paycheck

Real dollar example: $7,500 catch-up contribution at 30% tax bracket
- Traditional 401(k): Take-home pay decreases by ~$5,250 (with $2,250 tax savings)
- Roth 401(k): Take-home pay decreases by full $7,500 (no immediate tax savings)
Monthly impact: Approximately $625 less per month in take-home pay

Who's Affected?

High earners: Anyone over 50 earning $145,000+ per employer
Income threshold is per employer, not combined if working multiple jobs
Threshold will adjust for inflation in future years
Millions of American workers will be impacted

Good News for Earners under $145,000

Workers earning $145,000 or less: Nothing changes
Full flexibility to choose between traditional and Roth contributions
Still get immediate tax deduction with traditional contributions
Complete control over retirement savings strategy

Special Section: Entrepreneurs & Small Business Owners

Solo 401(k) options available for self-employed individuals
Same 2026 Roth catch-up rule applies if earning over $145,000 in W-2 wages
SEP IRA option: Up to $70,000 contribution limit in 2025
SIMPLE IRA for businesses with employees

The Silver Lining

Enhanced catch-up limits for ages 60-63 (up to $11,250 in 2025)
Roth accounts provide tax-free retirement income
No required minimum distributions during lifetime for Roth accounts
Tax-free inheritance for heirs

Key Numbers to Remember

$145,000 - Income threshold for mandatory Roth catch-up contributions
$23,500 - Standard 401(k) contribution limit (2025)
$7,500 - Catch-up contribution limit for age 50+ (2025)
$11,250 - Enhanced catch-up limit for ages 60-63 (2025)
$70,000 - SEP IRA contribution limit (2025)
$5,000 - Maximum annual startup cost tax credit for small businesses (3 years)
$1,000 - Maximum employer match tax credit per employee

Disclaimer

This podcast is for informational and educational purposes only. The host is not a licensed financial advisor, CPA, tax professional, or attorney. All content is based on publicly available information and should not be considered personalized financial, investment, tax, or legal advice.

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