A new IRS rule taking effect this year is stripping higher-earning older Americans of a long-held retirement tax benefit, and many are unaware of the change.
Starting 1 January 2026, workers aged 50 and over who earned more than $150,000 (£111,329) in FICA wages last year must now direct their 401(k) catch-up contributions into Roth accounts rather than traditional pretax accounts. This change eliminates the upfront tax deduction that has historically helped this group reduce their taxable income during their highest earning years.
