News

January 6, 2026

Wealth Expert Explains Sweeping Changes To 401(k) Contributions in New Year

BST & Co. CPAs, LLP, one of the Capital Region’s leading accounting and management consulting firms, today outlined sweeping changes to the nation’s most popular retirement savings plan that will significantly impact a large portion of the American workforce.

Effective January 2026, employees who earned above a minimum threshold in 2025 will no longer be able to make catch-up contributions on a pre-tax basis to their retirement savings accounts. Rather, these supplemental contributions will need to be made on an after-tax basis through a Roth 401(k) account.

“There are two critical elements that will impact high wage earners who are contributing to their retirement starting now,” said Bob Canterbury, Senior Wealth Advisor with Dopkins Wealth Management, BST’s wealth management partner. “The first change is that these employees will only be able to allocate additional dollars toward retirement by paying taxes up front on these supplemental savings contributions. The second factor is that these employees may not even be able to take advantage of the additional savings opportunities if their employers don’t offer this type of retirement savings account.”

Most 401(k) savings plans work in one of two ways: participants may contribute on a pre-tax basis which reduces current taxable income and defers taxes until savings are withdrawn. Alternatively, when participants contribute through a 401(k) Roth account, taxes must be paid up-front without the benefit of reducing current taxable income, but the savings are then able to be withdrawn tax free.

  • Beginning in 2026, all eligible workers will be able to save up to $24,500 in their 401(k) retirement accounts, an increase of $1,000 over the current year.
  • Older workers, defined as 50 and above, will be able to save an additional $8,000 under the so-called catch-up contribution allowance, for a total of $32,500.
  • Those ages 60 to 63 will be able to contribute even more, for a total of $35,750.

The major change, which takes effect in 2026, will impact workers who are 50 and older and who earned at least $150,000 in 2025.

  • All catch-up contributions for this group of employees – $8,000 in additional retirement savings for those up to age 59 and $11,250 for those starting at age 60 – must be made on an after-tax basis through a Roth 401(k) account.
  • These catch-up contributions cannot be deducted from gross wages and are subject to taxation up front at ordinary income levels.
  • The benefit is realized at the back end when these supplemental savings may be withdrawn tax-free.

Among the biggest challenges with the new mandate is that employers are not required to offer Roth 401(k) options, which means many employees may find themselves shut out from taking advantage of catch-up contributions in the New Year.

“There is nothing in the new federal guidelines which mandates that employers offer this type of retirement savings account,” said Canterbury. “Traditional 401(k) plans are pretty much universal, but Roth 401(k) plans are still often the exception rather than the rule, particularly among many small businesses and non-profit organizations. This may be the opportune time for employees to approach their employers about amending their plans if they don’t already offer the Roth 401(k) feature.”

Dopkins Wealth Management, in partnership with BST, can assist businesses and organizations of any size to incorporate a Roth 401(k) option based on the forthcoming rule changes.

In addition to wealth management, BST offers a broad portfolio of accounting and auditing, tax, consulting, valuation, forensic accounting and litigation support. BST Consulting Group, the firm’s expansive outsourced services line includes Accounting & Advisory, Cybersecurity, Marketing and Talent Strategies divisions, available either à la carte or in combination with one another, to deliver tailor-made strategies for businesses and nonprofit organizations at all phases of development.

For more information about DWM visit dopkinswealthmanagement.com. For more information about BST & Co. visit BSTco.com.