New Retirement Contribution Rules Are Coming For 'Upper Class' Seniors

According to the Federal Reserve, Americans between 55 and 64 had a median of $185,000 in retirement accounts in 2022. That number represents just one of many alarming retirement stats that might concern you. Northwestern Mutual says the target for a comfortable retirement in 2025 should be closer to $1.26 million. The gap is huge and, to close it, many older workers are boosting their retirement savings with catch-up contributions to accelerate their savings beyond standard limits.

But big changes are now reshaping how wealthier seniors save. On September 15, 2025, the U.S. Department of the Treasury and the IRS issued final regulations that redefine some of the biggest retirement savings changes coming in 2025. Under the SECURE 2.0 Act, starting in 2026, upper class seniors will have to channel catch-up contributions into Roth (after-tax) accounts instead of traditional pre-tax ones.

High earners will pay taxes on those contributions right away. They're giving up deductions now for tax-free money later in retirement. This change affects 401(k) and 403(b) plans, plus governmental 457(b) plans. IRA catch-up contributions stay the same, though — no Roth rule there. Plan admins and employers must update plan documents and payroll systems to implement these changes, ensuring compliance and helping participants avoid the kind of common 401(k) mistake that could cost you a fortune.

The effects of the new catch-up rules depend on your age and income. The contribution setup splits savers into two age tiers: The IRS reported that the standard catch-up contribution limit remains $7,500 for those aged 50 and older, but workers between the ages of 60 and 63 can contribute up to $11,250 in catch-up contributions if their plan allows. The difference is how these dollars get taxed. For example, a 62-year-old earning $150,000 in 2025 can put the regular $23,500 into a 401(k) on a pre-tax basis and keep the current-year deduction. But the enhanced $11,250 catch-up has to go into a designated Roth account, so they pay taxes immediately with no offsetting deduction.

Who gets affected depends on a specific wage test. Look at W‑2 Box 3, which lists a worker's Social Security wages. If that number reads more than $145,000, then these changes apply to you. Though, notably, if you switched jobs, pay from past employers is excluded. Only aggregate wages from your current plan-sponsoring employer count toward the threshold. That detail creates an operational to-do for employers.

Plans without existing Roth features must add them by the effective date, or affected participants cannot make any catch-up contributions. The rollout offers some flexibility, yet the deadlines are firm. The Treasury and IRS finalized these regulations with full compliance required by January 1, 2027 for most workplace retirement plans.

Most workers who qualify for catch-up contributions don't actually use them. Vanguard's 2025 analysis of more than 1,400 retirement plans showed only 16% of eligible employees made catch-up contributions in 2024 — the majority of whom were earning $150,000 or more. For higher earners, though, the mandatory Roth treatment builds a serious tax-free bucket for retirement. It's especially useful if they expect to stay in high tax brackets or if future tax rates climb. This approach is one of the ways to minimize your tax liability in retirement, where having tax-free income becomes increasingly important.

That's why planning matters. Affected savers should review their payroll tax withholding so they're setting aside enough to cover the extra taxes that come from making after-tax contributions. This is one of the most effective ways to avoid paying taxes legally by planning ahead rather than scrambling at tax time. Anyone using the full $11,250 catch-up should adjust their tax withholding to account for the higher tax burden from making after-tax Roth contributions.

When you put cash in matters for your tax plan. Talk to a financial advisor or tax pro for help mapping out multi-year projections. That way, you'll know whether to front-load your Roth catch-up in 2025 or wait for 2026.