Saving in a 401(k) has gotten a bit more complicated for some older workers, thanks to a new rule taking effect this year that prohibits tax-deferred catch-up contributions for high earners. While most workers won't notice any changes, it's worth reviewing the rules anyway, just in case they apply to you in the future.

Accidentally making tax-deferred catch-up contributions when you're not eligible could lead to tax penalties. Here's what you need to know.

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You must make Roth catch-up contributions if your annual income is $150,000 or higher

A new 2026 law requires those making $150,000 or more in 2026 to make Roth catch-up contributions to their accounts, rather than pre-tax contributions. Catch-up contributions are the additional amounts adults 50 and older can save above the $24,500 standard contribution limit in 2026.

The change was intended to force wealthy Americans to pay taxes on their catch-up contributions in the year they make them, while they're likely in a higher tax bracket, rather than deferring these taxes until retirement. If this new rule applies to you, you may have to brace yourself for a higher tax bill when you file your 2026 return.

It might not be as bad as you think, though. You can still use a traditional 401(k) until you reach the $24,500 limit for the year. Then, you can switch over to a Roth 401(k) if you have one.

The size of the catch-up contribution you're allowed to make depends on your age. Those who will be ages 50 to 59 or 64 or older by the end of the year can make up to $8,000 in catch-up contributions this year. Those aged 60 to 63 by the end of the year can make up to $11,250 in catch-up contributions for 2026.

The silver lining

While no one loves a larger tax bill, Roth catch-up contributions have one big advantage when you retire: You won't owe taxes on those withdrawals. This gives you greater control over your future tax bills. For example, if you're nearing the top of your tax bracket during the final weeks of the year, you might switch to only using your Roth savings so you can avoid jumping up to the next tax bracket.

But in the near term, it's important to plan for larger tax bills. If you're used to getting refunds, you may not actually owe anything out of pocket when you file your return. You might just get less back than you expected. Consult an accountant for personalized advice on how this rule change could affect you.