In today’s episode, you’ll learn more about:
- The 2026 401(k) contribution and catch-up limits.
- Who is affected by the new mandatory Roth catch-up rule.
- Why different employer plans may handle catch-up contributions differently.
- How to determine whether you’re actually on pace to maximize your contributions.
- Why employer matching and true-up provisions should be part of the calculation.
- How after-tax 401(k) contributions can allow some employees to save substantially more.
- How after-tax contributions may be converted to Roth through a Mega Backdoor Roth strategy.
- Why your employer retirement plan deserves an annual checkup.
Listen Now:
The Smart Take:
Think you’re on track to max out your 401(k) this year? The answer may be more complicated than you think.
New rules took effect in 2026, requiring certain higher-income workers to make their catch-up contributions as Roth contributions. But employers and retirement plan providers aren’t all handling the process exactly the same way.
In this episode, Tyler Emrick, CFA®, CFP®, explains what changed and why this is a good year to take a closer look at your employer retirement plan before year-end.
A 401(k) shouldn’t necessarily be something you set once in January and forget about. A little planning before year-end can help make sure you’re taking advantage of everything your plan allows.
Go Inside the Episode:
0:00 – Intro
3:04 – What Changed in 2026?
6:45 – Are you on pace to max out?
9:14 – Get the full employer match
11:25 – Ways to save even more
15:50 – Annual 401k checkup
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The Hosts:
Kevin Kroskey, CFP®, MBA – About – Contact
Tyler Emrick, CFA®, CFP® – About – Contact
Episode Transcript:
Tyler Emrick:
Think you’re maxing out your 401(k) this year? You may want to double check. A new rule took effect in 2026 that requires certain high income workers to make their catch-up contributions as Roth contributions. And what we’re finding is that employer plans aren’t all handling that process the exact same way. We’ve been reviewing pay stubs, running contribution projections, logging on to retirement plans, and even calling plan providers to figure out exactly how these contributions are being handled. Well, we got you covered today. We’re going to explain what changed, how to make sure you actually are on pace to maximize your retirement plan, and one additional opportunity that could allow you to put significantly more back in your 401(k).
Walter Storholt:
Hey, it’s another episode of Retire Smarter, we’re so glad you’re with us today. I’m Walter Storholt, as always joined by Tyler Emrick. He is a CERTIFIED FINANCIAL PLANNER, a chartered financial analyst, and one of the great wealth advisors at True Wealth Design. We’ve got a great conversation on the way today. You’re maxing out your 401(k), or are you really? Are you sure that you are? And also some other cool nuances that have kind of come into play this year. And it’s cool because we’re doing this a little over halfway through the year. So, yes, it’s alerting people to the new rules, Tyler, but also you’re actually seeing evidence of some of the confusion from clients and prospective clients who are coming to meet with you.
Tyler Emrick:
You got it. I think no less than three meetings in the last week and a half, this has come up. So, it is top of mind to me right now. And anytime there’s a big change like this from year to year, some employers do a wonderful job of rolling that out, communicating with their team members and their employees, and then others, it’s kind of like, way back here on the side and gets lost in the shuffle. And we don’t want anybody to get lost in the shuffle. So, if it’s coming up with the families that we work with, likely some of our listeners here would probably be doing some of the same things, so we want to bring it to everyone’s attention and work through it.
Because the worst thing that could happen is you think one thing and then come to find out at the end of the year, maybe you didn’t max out or you didn’t adjust your contributions when you needed to, which that’s after the fact and certainly not going to work out well.
Walter Storholt:
Yeah. It may sound like small potatoes to some, but if maxing out’s important to you and then you’re not doing it, well, that’s something we want to fix and want to address as well as the other rules you’re going to hit on today.
Tyler Emrick:
Oh, you nailed it. And it could be a pretty fairly sizable amount. If you break down the contributions… And well, just to set the stage here a bit, we’re talking about retirement plans through your employer. So, this is 401(k)s, 403(b)s, and some 457 plans are going to be applicable to some of these contribution limits as well.
Walter Storholt:
You may hear us just reference the 401(k) during the episode, but if you have one of those other plans, you can kind of apply this thinking.
Tyler Emrick:
You got it. Right.
Walter Storholt:
Got it.
Tyler Emrick:
And when you think about, well, hey, what can I contribute to my plan? Well, just as some things, they like to keep us financial advisors employed, so they have tiers and have some quirkiness to it. So, everybody has a pre-tax and Roth contribution limit heading into the year of 24,500. Okay? Now, depending on your age, there are some, what we call additional catch-up contributions that you can do. If you’re over 50, you can do an $8,000 catch-up contribution, and if you’re in this real short window between 60 and 63, you even have a higher catch-up, $11,250. So, if you happen to be age 60 to 63, you can put upwards of $35,750 inside of your retirement plans, either pre-tax or Roth or a combination of the two. So, the new rule that changed for this year, which is kind of tripping people up, has everything to do with those catch-up contributions.
So, if you’re over 50, again, catch-up contribution, the standard one’s $8,000. And it has everything to do with actually how much you made in the year before. So, they’re going to be looking at your W-2, there’s a box on there called FICO wages, and if that amount exceeded $150,000, well, your catch-up contribution now has to be Roth. It cannot be pre-tax. So, pretty self-explanatory there, not too big of a deal. The problem is that when you go onto these websites to wherever your retirement plan is where the custody is, so your Fidelity, Schwab, Empower, these are the big names out there that hold these retirement plans, and you go to look at your contribution percentage and you set that, a lot of them are not denoting catch-up contributions. So, they just have one big percentage that, hey, I want to contribute 10% of my pay.
And if you have traditionally maxed out by contributing 10% of your pay pre-tax, well, the question becomes, well, is the employer going to automatically, once you hit your contribution limit and start to switch over to the catch-up, are they going to automatically contribute that to Roth or are they going to shut off your contributions and you have to make an election separately to say, yes, I want that catch-up contribution to be Roth? So, for individuals, some of them of you, hey, that contribution, you need to do something to ensure that that switch happens or you’re going to miss the opportunity of putting $8,000 back inside of your retirement plan. Which, for some, I mean, that’s certainly a big change.
Walter Storholt:
Yeah. And since they’re not all tracking this the same and implementing it the same, I can see where all this confusion pops up.
Tyler Emrick:
Correct. Some plans I’ve gone and called and there’s a separate election and you just tell them and it’s good. Some plans you actually got to log into your portal and actually there’s a separate catch-up contribution percentage. So, if you’ve never had to go in there and actually elect that percentage, they’re not going to do it, and it’ll shut off once you hit the 24,5 and you’ll miss out on being able to do that catch-up contribution.
Walter Storholt:
Okay.
Tyler Emrick:
So, absolutely. We’ve seen the whole gamut, right? Because this change is really just effect for 2026. So, a lot of individuals who are used to maxing out, maybe they max out on their pays sometime around this time, September, October timeframe, and they see a bump in their paycheck. Well, if that bump comes a little earlier than what you would expect, that’s a tall tale sign that maybe you need to go in and make some of those adjustments. And probably the reason why this is top of mind, like I said before, I’ve dealt with this here recently and a handful of times is because what we’re doing right now with the families that we’re meeting with is we are doing that kind of analysis. And if you’re not doing it, you probably should.
And what I mean by that type of analysis is really just taking a look at your pay stub and extrapolating it out over the remainder of the year, and saying, hey, am I going to max out these things? Am I going to max out my 401(k) contribution? Am I going to max out my HSA contribution? Am I going to withhold enough in taxes? So, it’s always good housekeeping to be doing these projections and to see where you fall to make sure that you’re kind of on track to accomplish the goals because your income changes, these contribution limits changes. We always need to go in and tweak it. We could have a year like this year where there’s some big changes, where your catch-up contribution needs to be Roth for some individuals.
So, it’s always good housekeeping, Walt, to do that and I think it’ll help make sure there’s none of those surprises coming towards the end of the year. So, we’re in a thick of that right now and that’s why it’s top of mind.
Walter Storholt:
Yeah.
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Walter Storholt:
Yeah. Depending on life circumstances, we’ve done it lots of different ways, where we’ve had specific amounts held from paychecks some years, and other years we’ve done percentages, and knowing that we probably would max out before we get to December and maybe even before November, and just trying to manipulate it that way a little bit just to make sure we’re ahead of the game. But then if you’re changing that year to year, or then you don’t adjust year to year, you could then potentially leave that opportunity on the table.
Tyler Emrick:
You could. Yeah. Well, and the bonuses are great segue for that. I have a number of families where, hey, maybe they get year-end bonuses and their employer will actually let them withhold a specific dollar or percentage off of just that particular bonus.
Walter Storholt:
Oh, interesting. Okay.
Tyler Emrick:
And they can kind of catch up and do it towards the end of the year here. So, depending on your employer and how they do it, always worth running it by your HR to see maybe what options that you have or certainly your financial advisor should be doing a lot of this heavy lifting for you to make sure that you’re there. Another quirky one that comes up from time to time too is, as you’re thinking about how to contribute to your retirement plans, I’ve even had it where individuals try to max out very early in the year, and depending on the plan, that could be a bad thing because if we think about maxing out throughout early in the year, I mean, I’ve seen some individuals max out in the first quarter or the second quarter of the year.
But if their 401(k) plan does not do a true-up contribution, then you could be giving up some free money in the form of a company match, because hey, if your contribution stopped to your plan in second quarter, are you still getting the matching contribution that you should be getting from your employer? They call it a true-up contribution. I’ll never forget, I’ve met with a client, it’s been a handful of years ago now where he was actually doing that. He was maxing out really early, and we were looking at it, and I was like, “Does your plan do a true-up contribution where your employer gives you the free company match?” He’s like, “I don’t know.” And we called and they didn’t. So, by him contributing that early, he didn’t get some of the free match that he should have.
Walter Storholt:
Interesting.
Tyler Emrick:
He should have spread out those contributions throughout the entirety of the year, which is really quirky, right? I mean, who would have thought?
Walter Storholt:
Yeah, never heard of such thing.
Tyler Emrick:
What are you talking about? I did a quick search on Claude to figure out the statistics, and Claude said about a third of plans don’t do that true-up contribution.
Walter Storholt:
Really?
Tyler Emrick:
Which was a little high. It felt a little high to me because it was rare. I used to work in the 401(k) side of the business quite a bit, so I’d work with these plans all the time, and we’ve seen it every now and again, but it was rare. A third seems very high to me, from my personal experience. But in either case, you want to know if you’re maxing out really early, are they doing that true-up contribution and are you getting that free money? Because we do not want to be giving up free money, for sure.
Walter Storholt:
No, that’s rule number one.
Tyler Emrick:
It is. It is. It is.
Walter Storholt:
Don’t give up free money.
Tyler Emrick:
So, as I think about changes too, I mean, over the years, what I wanted to leave everyone with is they have their retirement plan contributions top of mind listening today, and maybe you’re going to go back in and check. Well, I know a lot of families are doing that mega backdoor Roth contribution, right? So, for those of you that may not know that, that would be a contribution where, hey, we talked about some limits today. We talked about the pre-tax or Roth contribution limit of 24,500, we talked about the catch-up contribution. Well, there is another limit, which is the limit of how much money can actually go into your 401(k) plan between you and the employer? They’re going to cap how much money you put in pre-tax or Roth, those are the limits that we’ve been talking about throughout the show today. But there is this other limit, which is for 2026, it’s $72,000, which is the amount of money that can actually go into your 401(k) between you and your employer.
And if you’re over 15, you can do the catch-up, but actually the catch-up’s on top, so it goes up to $80,000 or $83,000 if you got that super catch-up… The magic age is between 60 and 63. But when we look at this, a lot of families will look and say, “Well, I maxed out my retirement plan contribution, I did the most I could pre-tax, a Roth.” The matching or employer contributions are normally set. Normally there’s a gap there and we haven’t reached $72,000 or $80,000, which would be the contribution max. So, you can do that if the plan allows and do it in the form of what’s called after-tax contributions to fill those up. And while that’s just as it sounds, the money goes from your paycheck into the retirement plan, but it is after-tax, so you do not get a deduction for it. And you might be like, “Well, doesn’t that sound like Roth? Roth’s the same way.”
Walter Storholt:
Right.
Tyler Emrick:
Well, there’s a key difference, right? The after-tax contribution, actually any earnings that you make on it are still taxable to you and included in that after-tax, whereas Roth-
Walter Storholt:
So, it’s more like a taxable brokerage treatment?
Tyler Emrick:
Sort of. Sort of. Yeah. It’s kind of this messy middle between pre-tax and Roth. And well, anytime there is some of that messiness, well, there’s good housekeeping items that you can do. So, if you’re an individual that is doing these after-tax contributions, or an individual that has excess cash flow that could start doing these extra contributions, normally they’re a good thing to be thinking about, what the plans also will allow you to do is if you’re making an after-tax contribution, they would allow you to immediately take that money and convert it to a Roth. And by doing that, you’re taking the money that you have not gotten a tax deduction for, you’re moving it to a Roth so that it’s not a taxable event, but now that it’s in the Roth, you are growing tax-free. So, it’s kind of a backdoor way of getting money into a Roth account, which we all know the benefits of having money inside of a Roth account.
Well, just like we were talking about these employer plans handling catch-up contributions differently, they all handle after-tax contributions differently as well. Some plans don’t even allow you to contribute after-tax money to their plan. Some will allow you to do it and they will not allow you to convert it over to a Roth unless you call or you go online and convert it. So, a lot of families will have standing instructions in January to give them a call, and we’ll call the 401(k) provider and do that Roth conversion of all that after-tax money that they contributed in the prior year.
Some retirement plans, which over the last five to eight years have really started to allow you to do, is they will automatically convert that after-tax contribution to Roth for you each and every pay. So, you don’t have to do it, right?
Walter Storholt:
That’s nice.
Tyler Emrick:
So, that way you don’t have some of these earnings growing up in there and that would be taxable to you at some point down the road [inaudible 00:15:21].
Walter Storholt:
Because it seems like if you’re going to overfund this account, you want that to be Roth.
Tyler Emrick:
You do.
Walter Storholt:
There’s not a reason why you would want that messiness and want it to grow with the tax burden, right?
Tyler Emrick:
Correct. Correct. Yep. So you want to try to get. This would be the whole advantage of
Walter Storholt:
Doing this versus putting it just in a taxable brokerage account is to unlock the Roth part.
Tyler Emrick:
You got it.
Walter Storholt:
Okay.
Tyler Emrick:
You got it. Exactly right. So, if you can do that efficiently without having any other taxable event or any other gains in there, that’s the ideal situation. But of course, again, each one of these 401(k) plans, 403(b) plans, they’re all different, right?
Walter Storholt:
Yeah.
Tyler Emrick:
The employer, they all have baseline rules, but they all can expand on it and have different withdrawal or conversion or contribution rules that you need to follow. So, it’s very important. If you haven’t looked at your 401(k) plan that in depth with your current advisor, we really recommend that you do that. And really, we have a part of just basically part of the annual checkup as kind of the housekeeping items that we do for our families, and we do it in the form of taking a look at your pay stub, projecting it out and seeing that these contributions are working the way that they should, and if any adjustments need to be made. So, always a good time to do that now here in Q3 as we start heading into Q4, because you still have some time to make some adjustments with those remaining pays if you need to.
Walter Storholt:
Yeah, all makes sense. So, now’s the time for your checkup, now’s the time to get all of these things addressed, and I always love when I learn something new on today’s show.
Tyler Emrick:
Yeah?
Walter Storholt:
I feel like I learned a couple of things today.
Tyler Emrick:
Not bad, I’ll take it.
Walter Storholt:
Yeah, absolutely.
Tyler Emrick:
Good deal.
Walter Storholt:
So, the two big learning things for me were the, what did you call it? The true-up in the-
Tyler Emrick:
The true-up contribution.
Walter Storholt:
… in your contributions and the match. And that was the one thing. And then also this overfunding of the 401(k), I feel like that’s a bit new territory. And I’ve heard of the mega backdoor Roth and all of those strategies, but seeing the numbers, seeing the why behind it is very helpful.
Tyler Emrick:
You got it.
Walter Storholt:
This is cool.
Tyler Emrick:
Yeah, no, always a good time to be thinking about it for sure.
Walter Storholt:
Yeah. So, don’t just set it and forget it, don’t just let what worked last year roll over into this year without a second look at how you’ve planned for these things, because if maxing out is important to you, if tax advantages are important to you, it’s worth this deeper look. And I hope this was helpful to folks today. If you’d like to talk a little bit more one-on-one with Tyler, and the team at True Wealth Design about your plan, about your financial situation, it’s very easy to do that. We’ve got a link in the description of today’s show that you can click on and schedule a time to visit. It’s a discovery call with Tyler or an experienced wealth advisor on the team, they’re going to see if you’re a good fit to work with them and vice versa. Would you be a good fit to work with one another?
And then you can move forward from there through the full planning process. But if you’d like just a free conversation to go back and forth about your situation and see where you stand today and go through that discovery process, it’s very easy to do. Again, just click the link in the description of today’s show and you’ll be all set. It’s always at truewealthdesign.com as well, and just look for the Let’s Talk button to schedule your time to visit. Tyler, thanks so much for the help today, appreciate this conversation, and we’ll talk again soon.
Tyler Emrick:
We’ll catch you on the next one.
Walter Storholt:
All right. See you later. That’s Tyler, I’m Walter, we’ll see you next time right back here on Retire Smarter.
Speaker 2:
Information provided is for informational purposes only and does not constitute investment tax or legal advice. Information is obtained from sources that are deemed to be reliable, but their accurateness and completeness cannot be guaranteed. All performance reference is historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees.
