After two weeks on the road, navigating the dense wildfire smoke in Northern Michigan and the blistering heat of central Missouri, I've finally gotten the opportunity to sit down and respond to the incredible questions submitted by our readers.
But first, what I’m seeing: Markets are climbing, earnings season is humming, and the Fed is treating every rate decision like a family group chat: plenty of opinions, very little resolution. Inflation has eased from its peak, yet it still has enough life to keep rate-cut hopes wobbling. Investors are left debating whether this is a soft landing, a second wind, or simply the economy wearing expensive sunglasses.
Meanwhile, higher earners opening their 401(k) portals are finding a surprise of their own: catch-up dollars pushed into Roth. Because apparently a larger current tax bill needed a fresh payroll feature. Here is how I would think about the rule before cutting the contribution, cursing payroll, or mailing Congress a fruit basket filled with receipts and rotten apples.
I am 58, earn about $220,000, and have spent years putting every available dollar into the pre-tax side of my 401(k). My 2026 election looked familiar until payroll moved my $8,000 catch-up into Roth and raised my current tax bill. The message made it sound mandatory, which felt rich coming from a portal that still lists my old office suite.
I am already in a high federal bracket, so paying tax today feels backward. My plan was simple: take the deduction during my peak earning years, retire in a lower bracket, and pull funds later at a cheaper rate. At this point, I am being told Congress has a fresh plan for my paycheck.
Should I keep making the catch-up, cut it back, or shift cash toward a brokerage account? I can handle the tax hit, but I hate paying extra tax simply because a rule flipped.
- Payroll Hostage
Your payroll team may be following the rule exactly. For 2026, a worker age 50 or older with more than $150,000 of 2025 FICA wages from the employer sponsoring the plan generally must direct catch-up contributions into Roth. The key driver is prior-year wages from that employer, rather than household income, AGI, or a spouse’s pay.
Here is how I would think about it: the rule changes the tax character of the catch-up, yet it does little to weaken the value of saving. You lose the current deduction on that slice, while gaining tax-free qualified withdrawals later and a larger pool of after-tax retirement assets.
A few details can swing the planning call. Your current marginal tax rate matters, as does the rate you expect during retirement. Cash flow matters too, since Roth contributions create a larger tax bill today. A future move from a high-tax state to a lower-tax state can favor pre-tax savings, while large pensions, deferred pay, business income, or sizable IRA balances can make Roth assets more useful later.
The wage test has a few sharp edges. It generally looks at FICA wages from the employer sponsoring the plan during the prior calendar year. A new hire with zero prior-year wages from that employer may need to inquire with their plan provider to confirm how their catch-up will be treated and whether the plan is up-to-date with Roth features to support them.
Put some math around your case. The 2026 base elective-deferral limit is $24,500, and the standard age-50 catch-up is $8,000, creating a total employee deferral of $32,500 for many eligible workers. Ages 60 through 63 may receive an $11,250 catch-up through a participating plan.
At age 58, assume you contribute the full $8,000 catch-up and sit in a 32% federal marginal bracket. A pre-tax catch-up could have reduced current federal tax by about $2,560:
$8,000 × 32% = $2,560
With Roth treatment, that $2,560 stays on your current tax tab. If the $8,000 grows at 6% for ten years, it reaches roughly $14,327. A qualified Roth withdrawal could deliver the full amount free of federal income tax, while a pre-tax withdrawal would face the tax rate in effect at that stage.
This is a simplified illustration, yet it shows the real trade: current tax relief versus future tax freedom.
This week, pull your 2025 Form W-2 and review the FICA wage figure tied to this employer. Ask the plan administrator where Roth catch-up dollars appear, how payroll handles the switch, and whether your regular deferrals can include a Roth mix earlier in the year. Then update your tax projection so the added current tax is planned rather than discovered during filing season.
I would also review the catch-up inside the full household plan. Charitable gifts, deferred compensation, HSA funding, equity awards, state residency, and retirement dates can matter far more than the $8,000 label by itself. The goal is a coordinated tax map, rather than a reflexive fight with payroll.
A common miss is treating Roth as a penalty and cutting the contribution entirely. That move saves current tax, yet it also gives up tax-advantaged space that expires at year-end. Once that calendar space is gone, a standard brokerage deposit fails to recreate it.
If the decision is Roth catch-up contributions vs taking it as an increased net paycheck with aspirations of depositing that increase into a brokerage account…. Either way you're paying taxes on that earned amount - you may as well consider the end purpose of the funds and long-term tax considerations when coming to a decision.
A second miss is assuming the $150,000 test tracks total income. It tracks prior-year FICA wages from the employer sponsoring the plan, subject to plan structure and detailed rules. A spouse’s earnings, portfolio gains, and income from a separate employer generally do little to this specific test.
The bottom line: keep the catch-up unless the current tax cost creates a real cash-flow strain or a wider planning issue points elsewhere. Payroll may have taken away a deduction, yet Roth space can still be valuable property inside a retirement plan.
Questions may have been altered or edited from the actual submission for brevity, clarity, or anonymity. Questions may not have been submitted by actual clients and may have been added by Kingsview for discussion purposes.