The New 2026 Solo 401(k) Roth Catch-Up Rule: What High-Income Owners Need to Know

The New 2026 Solo 401(k) Roth Catch-Up Rule: What High-Income Owners Need to Know

If you are over age 50, self-employed, and using (or considering) a Solo 401(k), there is a major change coming in 2026 that should be on your radar.
Thanks to the SECURE 2.0 Act, catch-up contributions for certain higher-income 401(k) participants will have to be made on a Roth (after-tax) basis beginning in 2026. This rule does not only apply to large corporate plans. It also applies to Solo 401(k) plans when the eligibility criteria is met.

Key points:

• What the new Roth catch-up rule is and where it came from
• Exactly when it applies and who is affected
• The 2026 Solo 401(k) contribution limits, including rules for ages 50 and older and ages 60 to 63
• Why Solo 401(k) plans vary significantly between providers
• Why IRA Financial is a leader in the Solo 401(k) space

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Where Did the New Roth Catch-Up Rule Come From?

In late 2022, Congress passed the SECURE 2.0 Act, which introduced dozens of changes to IRAs, 401(k)s, and other retirement plans. One of its revenue-raising provisions created a new requirement:

If you are age 50 or older and your prior-year wages from your employer exceed a certain threshold, any catch-up contributions you make to an applicable employer plan must be Roth contributions rather than pre-tax.

The rule was originally scheduled to take effect in the 2024 tax year, but plan sponsors and payroll systems were not ready. In response, the IRS issued Notice 2023-62, which delayed implementation until 2026.

In 2025, the IRS finalized regulations confirming that mandatory Roth catch-up contributions begin January 1, 2026, and that the transition relief ends December 31, 2025.

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Who Has to Make Roth Catch-Up Contributions in 2026?

Beginning in 2026, the rule applies to participants who:

• Are age 50 or older in the year they make catch-up contributions, and
• Had wages above the threshold in the prior year from the employer sponsoring the plan

For 2026, the threshold is $150,000 of prior-year wages, measured using 2025 Social Security wages (typically Box 3 on the W-2). See IRS 401(k) contribution limits for updates.

If you exceed this threshold, every dollar of your 2026 catch-up contribution must be Roth. Your standard employee deferral (up to the regular limit) can still be either pre-tax or Roth, but the catch-up portion must be Roth.

A few important clarifications:

• The $150,000 threshold will be indexed for inflation.
• Only wages from the current plan sponsor count. Investment income, self-employment income from other businesses, and wages from previous employers do not.
• If a plan does not offer Roth contributions at all, high-income participants will not be allowed to make catch-up contributions once the rule takes effect.

This last point matters for Solo 401(k) owners. If you want to continue making catch-up contributions, your plan must support Roth deferrals and be structured correctly.

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How Does This Apply to Solo 401(k) Plans?

A Solo 401(k) is a 401(k) plan for a business owner with no full-time employees other than possibly a spouse. Because it is still a 401(k) from the IRS perspective, it is fully subject to SECURE 2.0.

Here is how the rule applies:

• If you operate as an S corporation or C corporation and pay yourself W-2 wages, and those wages exceed the threshold, your catch-up contributions in 2026 will have to be Roth contributions.
• If you are a sole proprietor or partner who only has self-employment income, the rule is more nuanced because the statute refers specifically to wages. Some professionals argue the wage test technically applies to employees only.

Even with that nuance, most high-income Solo 401(k) owners should assume Roth catch-up contributions will matter and should make sure their plan is Roth-ready.

Having a Roth feature provides two advantages:

1. You can comply with the rule if it applies to you.
2. You can choose to make Roth catch-up contributions voluntarily to build more tax-free retirement income.

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2026 Solo 401(k) Contribution Limits: Under 50, 50+, and Ages 60 to 63

The Roth catch-up rule does not change how much you can contribute. It only changes how some contributions must be taxed. The IRS has already released the key 401(k) limits for 2026.

Employee Elective Deferrals (All 401(k) Plans, Including Solo)

For 2026:

• Standard employee deferral limit for those under 50:
  $24,500
• General catch-up contribution for those age 50 or older:
  Up to $8,000, for a total possible employee deferral of $32,500
• Special enhanced catch-up for ages 60 to 63:
  Up to $11,250, for a maximum employee deferral of $35,750

If you exceed the high-income threshold, the catch-up portion must be Roth. Standard deferrals can still be pre-tax or Roth.

Employer Contributions (Profit Sharing)

Business owners can also make employer contributions:

• Corporations can contribute up to 25 percent of W-2 wages
• Sole proprietors follow a different formula, but it effectively amounts to about 20 percent of net self-employment income

Overall 415(c) Limit for 2026

The combined employee and employer contribution limit is $72,000, not counting catch-up contributions.

So for 2026:

• Under age 50:
  Up to $24,500 as an employee, and up to $72,000 total if income allows
• Age 50 or older:
  $24,500 regular employee deferral
  Up to $8,000 or $11,250 in catch-up contributions
  Employer contributions up to the $72,000 limit
  Total contributions can reach more than $80,000 when catch-up contributions are included

The biggest change for 2026 is not the amount you can contribute, but that high-income earners must make their catch-up contributions on a Roth basis. For more guidance, see Solo 401(k) contribution limits.

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Why Did Congress Push Roth Catch-Ups?

Congress chose to require Roth catch-up contributions for a simple reason: tax revenue.

• Pre-tax contributions reduce taxable income today.
• Roth contributions do not reduce income today, which raises more revenue for the government upfront.

By shifting higher earners toward Roth catch-up contributions, Congress:

• Generates additional revenue to pay for other SECURE 2.0 provisions
• Encourages more retirement savers to diversify into tax-free accounts
• Acknowledges that many high earners may be in similar or higher tax brackets in retirement

For Solo 401(k) owners, the message is clear:
If you are a high-income saver making catch-up contributions, Congress wants that money taxed now rather than later.

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Why Not All Solo 401(k) Plans Are the Same

Many Solo 401(k) plans look similar at first glance, but the plan document and provider expertise matter much more than most people realize.

Key differences that become critical under the new Roth catch-up rules include:

• Roth support. Not all plans allow Roth salary deferrals or Roth catch-up contributions.
• Catch-up contribution support. Some low-cost plans do not even include catch-up language.
• Alternative asset investing. Many brokerage-based plans restrict investments to stocks and mutual funds. Learn more about alternative asset investing.
• Plan loan and in-plan Roth conversion features. Some plans offer these features, while others do not.
• Compliance support. Self-directed Solo 401(k)s face complex rules involving prohibited transactions, disqualified persons, and UBTI.

If you are investing in real estate, private equity, private credit, or crypto, you need more than a generic plan document. You need a plan built to handle alternative assets and the new Roth requirements.

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Solo 401(k) Advantages for Self-Employed Investors

Even with the new rules, Solo 401(k)s remain one of the most powerful retirement structures available to entrepreneurs. They offer:

• Higher contribution limits than IRAs
• The ability to contribute both as employee and employer
• Separate pre-tax and Roth options inside one plan
• The potential for plan loans if allowed by the document
• Access to virtually any investment permitted under the tax code

For high earners over age 50, Solo 401(k)s offer something unique:
Large employer deductions combined with the ability to build a significant Roth balance through catch-up contributions.

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Why IRA Financial Is a Leader in Self-Directed Solo 401(k)s

The 2026 Roth catch-up rule is exactly the type of technical detail that can create problems for Solo 401(k) owners using a basic or generic plan.

IRA Financial’s platform was built specifically for self-directed investors and offers:

• Plan documents that support Roth deferrals, Roth catch-up contributions, plan loans, and in-plan Roth conversions
• Deep tax and IRS expertise related to self-directed investing
• Guidance on maximizing contributions while staying within IRS limits
• A structure designed to support real estate, private funds, private notes, crypto, and other alternative assets

As the 2026 deadline approaches, Solo 401(k) owners need a provider that understands both the IRS rules and the realities of alternative asset investing. IRA Financial is built around that combination.

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Final Thoughts

The shift to mandatory Roth catch-up contributions for higher-income earners in 2026 is more than a technical update. For Solo 401(k) owners, it is a signal that Congress wants more retirement savings to move into Roth territory.

If you are over 50 with strong business income, 2026 is not the year to ignore your Solo 401(k) structure. It is the year to make sure your plan supports Roth deferrals, catch-up contributions, and the investment flexibility you need.

And if you plan to invest your Solo 401(k) in real estate, private investments, or crypto, working with a provider that specializes in self-directed Solo 401(k)s, such as IRA Financial, can make a meaningful difference in both compliance and long-term results.

Have questions wondering if this affects you?
Schedule a Consultation with one of our retirement experts.