Congress is discussing changes to retirement savings, especially for those with high incomes. They are looking at adjusting 401(k) plans in 2026 as part of a tax reform effort and to ensure Social Security can continue to pay benefits. The goal is to make sure everyone benefits fairly from tax advantages, encourage people to save more for retirement, and make the retirement system financially sound for the future.
What Changes Congress Is Considering for 2026
Although no bill is finalized, key proposals focus on contribution limits, tax deductions, Roth requirements and income-based phaseouts. High earners with large retirement contributions stand to be affected the most.
1. Possible Roth-Only Contributions for High Earners
One major proposal would require high-income households to make Roth-only 401(k) contributions, eliminating the option for pre-tax deposits above certain income levels.
This means:
- No immediate tax deduction
- Tax-free withdrawals in retirement
- Higher taxable income today for top earners
2. Lower Tax Benefits for High-Income Traditional 401(k) Contributions
Lawmakers have suggested capping the tax deduction high earners receive for traditional 401(k) contributions. Instead of deducting at a high marginal rate, benefits may be replaced with a flat credit, reducing the upside for wealthy savers.
3. Increased Contribution Limits Tied to Inflation
Some proposals include lifting annual contribution caps to help middle-class savers, while maintaining stricter rules for high earners.
4. New Rules for Catch-Up Contributions
The SECURE Act 2.0 already made some catch-up contributions Roth-only for high earners, but Congress may expand this to:
- More age groups
- Additional income brackets
- Higher phased-in Roth requirements
5. Restrictions on Mega Backdoor Roth and High-Balance Accounts
Another proposal targets the “mega backdoor Roth,” often used by high earners to shelter tens of thousands of dollars tax-free. Congress may limit or eliminate:
- After-tax contributions
- IRA rollovers over specific thresholds
- Tax-free conversions for high-earner accounts exceeding $10M–$20M
2026 401(k) Proposals at a Glance
| Proposed Change | Who It Affects Most | Potential Impact |
|---|---|---|
| Roth-only contributions | High-income earners | Higher taxable income now |
| Reduced pre-tax deductions | Top tax brackets | Smaller tax break today |
| Higher contribution limits | Middle-income workers | More room to save |
| Expanded catch-up rules | Workers 50+ | More Roth requirements |
| Mega backdoor Roth limits | High earners | Reduced tax shelter options |
What This Means for High-Income Earners
High earners may need to restructure their savings strategies. Key impacts include:
- More taxable income in the years contributions are made
- Limited access to tax-deferred compounding
- Greater reliance on Roth strategies and after-tax savings
- Increased use of taxable brokerage accounts for long-term growth
Financial advisors are recommending early planning for those earning above specific income thresholds to minimize future tax hit.
Why Congress Is Considering These Reforms
Lawmakers are targeting the retirement tax system for several reasons:
- High earners currently receive the largest tax benefits
- 401(k) tax preferences reduce federal revenue
- Retirement savings imbalances continue to grow
- Roth accounts help the government collect more tax upfront
- Concerns about long-term Social Security funding push Congress to evaluate additional revenue sources
What Savers Should Do Before 2026
While changes are not yet final, high earners can prepare by:
- Reviewing Roth vs traditional contribution strategy
- Maximizing current pre-tax limits while available
- Speaking with a financial advisor about tax diversification
- Planning ahead for possible Roth-only catch-up contributions
- Assessing whether mega backdoor Roth strategies remain viable
Preparing early can prevent financial surprises when changes take effect.
Conclusion: Congress’s proposed 401(k) changes for 2026 could significantly shift how high earners save for retirement. With possible Roth-only contributions, reduced pre-tax advantages and tighter rules on high-balance accounts, wealthier savers may face more restrictions than ever before. Staying informed and adjusting strategies now will help individuals protect long-term retirement goals.
Disclaimer: These proposals are under review and may change before final legislation is passed.
