Higher earners over $150k must use Roth for 401(k) catch-up from 2025.

If you're over 50, a new 401(k) rule could change how you save for retirement. Catch-up contributions—extra money you can put into your 401(k) once you hit 50—are now limited to Roth accounts for higher earners.

The change applies to anyone earning at least $150,000 in 2025. Normally, catch-up contributions let you add an extra $8,000 on top of the standard $24,500 limit. But under the new rule, if your wages cross that threshold, your catch-up money must go into a Roth 401(k), meaning you pay taxes now instead of later. If your employer’s plan doesn’t offer a Roth option, you might not be able to make the catch-up contribution at all.

The switch to Roth isn’t as bad as it sounds. Money in a Roth 401(k) grows tax-free, and withdrawals in retirement aren’t taxed. You also avoid required minimum distributions, which can complicate later-year finances. The catch is that higher earners lose the upfront tax break of a traditional 401(k), where contributions reduce taxable income now. But if you expect to be in a higher tax bracket in retirement—or just want tax-free growth—the Roth could still be the better deal.

The rule only affects catch-up contributions. The first $24,500 of your 401(k) contribution can still go in pre-tax if you prefer. Still, the change means shifting when you pay taxes, not losing the break entirely. If this rule hits your paycheck, it’s worth talking to a financial advisor. They might find other ways to cut your tax bill while keeping your retirement savings on track. With many Americans already playing catch-up on retirement, making the most of these new rules could make a real difference.