Under the SECURE 2.0 Act, starting in 2026, workers earning more than $145,000 a year will lose the option to make pre-tax catch-up contributions to their 401(k) plans. Instead, these must go into Roth accounts, meaning the money is taxed now, not later. The change affects millions of late-career professionals who rely on catch-up contributions—up to $7,500 annually—to boost savings before retirement. For many, this shift could raise their taxable income by thousands of dollars each year.
A worker earning $200,000 who previously deducted a $7,500 catch-up contribution could see a noticeable difference in their 2026 return. The new Roth rule removes the immediate deduction benefit, raising current taxes even as future withdrawals become tax-free. Combined with required minimum distributions from traditional accounts—fully taxable withdrawals starting at age 73—the 2026 changes could create a double hit.
Retirees drawing RMDs while still earning part-time income or making Roth catch-ups could easily move into higher brackets. Analysts say timing and strategy will be critical. Lump-sum contributions late in the year could unintentionally trigger bracket creep, while spreading payments or adjusting withholdings could soften the blow. With inflation adjustments pushing thresholds up but not enough to offset income growth, many older Americans may find themselves paying more even with larger deductions.
Financial planners are urging workers over 50 to review employer plans now and confirm Roth options exist for 2026. If not, contributions may be blocked altogether.
The IRS has also warned employers to update systems in time to comply with the $145,000 income rule. The bottom line: higher brackets, higher RMDs, and Roth-only catch-ups make 2026 a pivotal tax year for older workers. Those who plan early could avoid hundreds or even thousands in unexpected taxes. Those who don’t might find retirement savings falling short just when they need them most.
What are the new tax changes for older workers in 2026?
Older workers and retirees are facing some important tax changes in 2026. The federal income-tax brackets are being updated, and standard deductions are rising. This means the thresholds at which you move into higher tax rates are slightly higher than before. For people over 65there’s an extra boost in the standard deduction, which helps, but it doesn’t fully offset other changes that could increase your taxable income.These changes can affect anyone who is drawing from retirement accounts, earning income from part-time work, or investing in taxable accounts. Even small differences in tax brackets can translate to hundreds or thousands of dollars in extra taxes. This makes planning ahead essential.
The new brackets and deductions are designed to account for inflation, but they can also make it easy to miscalculate your taxes if you rely on old numbers. Older workers need to understand exactly how these changes affect their overall tax picture so they can avoid surprises next year.
Understanding these changes now gives you a head start. By reviewing your income sources and expected withdrawals, you can plan to minimize tax hits before they happeninstead of scrambling at the last minute.
How can catch-up contributions impact your taxes?
If you’re over 50 and still working, you probably take advantage of catch-up contributions to your 401(k) or IRA. These contributions let you add extra money beyond the standard limit, which can be a huge benefit for retirement savings. But here’s the twist: tax rules are changingand some of these contributions might become less tax-efficient in 2026.
For example, adding a large catch-up contribution could push you into a higher tax bracket if you don’t account for all your income sources. This could mean paying a higher percentage in taxes on part of your income than you expect. It’s not about whether the contribution is good—it’s about when and how you make it.
Older workers need to be strategic. Look at your income projections for 2026 and ask yourself: will my extra contribution keep me comfortably within a tax bracket, or will it push me higher? Sometimes, smaller contributions spread across the year can save more in taxes than a lump sum.
Even retirees who aren’t working full-time need to be careful. Withdrawals from traditional retirement accounts or even Social Security can combine with any other income and create a bigger tax bill than anticipated. Timing and planning are everything.
What is the smartest move to reduce taxes in 2026?
One of the smartest moves older workers can consider is a Roth conversion. This strategy involves moving money from a traditional pre-tax retirement account into a Roth IRA. Why does this matter? Because with a Roth, your withdrawals in the future are tax-freeand Roth accounts aren’t subject to the same required minimum distributions as traditional accounts.
The key is to pay taxes now at your current rate instead of later when your income might push you into a higher bracket. This strategy works best if you anticipate that your income in 2026 or beyond will be higher, perhaps due to required distributions, investments, or part-time work.
A Roth conversion doesn’t have to be all or nothing. Many older workers do partial conversions to spread the tax hit over several years. This can help you manage your income more carefully and avoid suddenly jumping into a higher tax bracket.
Another approach is timing your withdrawals strategically. By planning how much to take out each year, you can stay in a lower tax bracket instead of being forced into a higher one by a single large withdrawal. Even a small adjustment in timing can make a big difference in the taxes you owe.
What practical steps can older workers take now?
So, what should you do today to prepare for 2026? Start by estimating your total taxable income for the year. Include all sources: retirement account withdrawals, Social Security, dividends, interest, and any part-time income. Knowing your estimated income helps you see which tax bracket you’ll likely land in.
Next, decide whether contributions to retirement accounts should be pre-tax or Roth. If you’re still working, a Roth contribution now might save you more taxes in the long run. If you’re retired, a Roth conversion can give you tax-free income in the future.
It’s also important to plan your withdrawals carefully. Avoid taking large amounts from multiple accounts in the same year if it will push you into a higher bracket. Spread them out over several years for smoother taxation.
Finally, make sure to capture any age-based benefits. People over 65 get extra boosts to the standard deduction, which can reduce taxable income. Take full advantage of this and double-check that all deductions and credits you qualify for are applied.
Why planning now is more important than ever
If you wait until next year, it might be too late to take full advantage of these strategies. Tax planning now allows you to pay less overallprotect more of your retirement savings, and avoid surprises.
Older workers often have complex finances. Between part-time work, investment income, Social Security, and retirement account withdrawals, the wrong move can push you into a higher tax bracket quickly. Planning ahead helps you manage this complexity effectively.
By making smart decisions now, like Roth conversions and strategically timed withdrawalsyou can actually turn potential tax increases into an advantage. Instead of feeling trapped by new rules, you’re proactively protecting your savings.