The High Earner’s 3-Point 401(k) Guide for 2025 and 2026

If you’re a high earner striving to maximize your retirement savings, you know the game is already complicated. Between navigating contribution limits, managing complex nondiscrimination testing (NDT) rules, which are designed to prevent plans from unfairly favoring highly compensated employees (HCEs), and choosing investments, it often feels like you need a finance degree just to keep up.

The information in this article reflects changes made through Fall 2025. Updated amounts for 2026 will be made available at www.eosg.com when they are announced by the Department of the Treasury.

We understand that when Congress introduces sweeping legislation like the SECURE 2.0 Act (formally known as the “Securing a Strong Retirement Act of 2022”), it can feel overwhelming. This law is designed to increase retirement access and savings across the board.

But for high earners, these changes require strategic attention. Here are three major changes to 401(k) rules under SECURE 2.0 that directly impact your financial planning:

1. A New, Larger Catch-Up Limit for Peak Earners (Ages 60–63)
   If you are approaching retirement age and find yourself needing to turbocharge your savings, perhaps compensating for a few years when you were focused on career growth or other expenses, SECURE 2.0 has provided a significant new opportunity.
   
   Currently, participants aged 50 or over can make additional “catch-up contributions” of $7,500 to help them get back on track. For taxable years beginning after December 31, 2023, the Act introduces a significantly higher catch-up limit for a specific window of time.
   
   For employees participating in plans other than SIMPLE plans (like traditional 401(k)s), if you attain age 60 to 63 before the close of the taxable year, your catch-up contribution limit is increased to $11,250. This new $11,250 limit will also be adjusted annually for increases in the cost-of-living every year.
   
   The Impact on You: This change is a powerful tool to push six figures of compensation, including regular deferrals, standard catch-ups, and the new increased catch-ups, into a tax-advantaged account just before retirement.

2. The Great Catch-Up Shift: Roth Contributions Become Mandatory
   While the new $11,250 catch-up limit is exciting, SECURE 2.0 introduces a major caveat that alters the tax strategy for high earners using this benefit.
   
   For taxable years beginning on January 1, 2026, the law generally mandates that catch-up contributions made by participants aged 50 and over who earn more than $145,000 in FICA wages must be made as designated Roth contributions.
   
   The $145,000 test is measured using the participant’s prior-year FICA wages from the employer sponsoring the plan (and is indexed to inflation), so whether you cross the threshold can depend on which employer’s wages are being measured.
   
   The Impact on You: High earners typically benefit the most from pre-tax elective deferrals in a traditional 401(k), as these contributions reduce their current taxable income (which is likely subject to a high marginal tax rate).
   
   A Roth contribution, conversely, is made using after-tax dollars and must be included in your gross income for the year of deferral. This means that if you rely on catch-up contributions to reduce your taxable income now, this benefit will generally be eliminated. Instead, you’ll be forced to recognize that income this year, taking the tax hit up front in exchange for ensuring that the future growth and distributions from that specific amount are tax-free in retirement.
   
   Please note, if your employer’s plan doesn’t offer Roth contributions, employees who would be subject to the Roth catch-up rule generally won’t be able to make catch-up contributions

3. The New Flexibility of Roth Employer Matching Contributions
   The cornerstone of many high earners’ retirement strategy is maximizing the employer matching contribution, often viewed as “free money”. Traditionally, employer contributions (including matches) have been tax-deferred; you pay taxes when you take a distribution.
   
   SECURE 2.0 now grants employers the option to permit employees to treat their employer-matched contributions as designated Roth contributions.
   
   The Impact on You: Designating an employer match as Roth will make that allocated amount includable in taxable income in the year allocated. While this increases your tax bill today, it provides immediate tax flexibility. For HCEs who are already disciplined savers and anticipate remaining in a high tax bracket in retirement, paying taxes on the match now guarantees that those funds, which can be substantial due to your higher contribution levels, will grow tax-free and be distributed tax-free later. This allows you to fine-tune your total retirement portfolio between traditional (pre-tax, taxed later) and Roth (after-tax, tax-free later) funds.

Navigating the Road Ahead

These changes reflect Congress’s desire to make retirement savings more robust, but they introduce new complexities for those already pushing the envelope of their contributions. While these new rules, particularly around Roth contributions, can initially seem like a setback if you prefer maximizing current tax deductions, they also offer unprecedented flexibility for strategic tax planning in retirement.

At Employer’s One Source Group (E1), we make it easy to turn these 401(k) changes into opportunities for your business and your employees. Whether you’re looking to start a retirement plan from scratch or enhance your existing one, our team can design a solution that aligns perfectly with your goals and integrates seamlessly with our HR and payroll services. Reach out to E1 today to build a smarter, more connected retirement plan for your workforce.