February 25, 2026

High Earners: Maximizing Tax Deferral in Workplace Retirement Plans

If you’re a high earner, your workplace retirement plan—such as a 401(k), 403(b), or 457(b)—is likely your main tool for reducing your current tax bill and building future retirement wealth. As you approach the annual contribution limits, knowing how today’s rules work—especially for catch-up contributions and highly compensated employee (HCE) status—can help you make the most of these plans.

Core Tax‑Deferral Opportunity

Workplace retirement plans let you put away money on a pre-tax or Roth (after-tax) basis, up to annual IRS limits. In 2026, you can defer up to $24,500 of your own income into a 401(k), 403(b), most 457 plans, or the Thrift Savings Plan.

If you’re 50 or older, you can generally put in an extra $8,000 as a catch-up contribution, bringing your total to $32,500 for 2026. If you’re between 60 and 63, your plan might even let you contribute a “super” catch-up amount of $11,250, if it’s adopted the SECURE 2.0 update. Including employer contributions, the combined total can climb to $72,000—or $80,000 if you’re 50 or older—in many defined contribution plans for 2026, depending on your plan’s rules.

Strategies When You’re Near the Cap

When you’re close to hitting the annual contribution cap, a few simple changes can help you squeeze the most out of your plan’s tax advantages.

Front-loading contributions: You can spread your contributions evenly throughout the year, or front-load them early if you prefer. Just make sure you don’t accidentally lose out on any employer matching by maxing out too soon.
Coordinating across multiple plans: If you participate in more than one 401(k) or 403(b) during the year, the 24,500‑dollar employee deferral limit applies in aggregate across all such plans, even though employer contributions are tracked separately.
Using health and dependent-care benefits wisely: Maxing out your health savings account (HSA) or flexible spending account (FSA) won’t affect your 401(k) deferral limit, but it can give you extra tax-advantaged savings as a high earner.

Since your marginal tax rate is usually highest during your peak earning years, every pre-tax dollar you put in lowers your current tax bill—and pushes that tax into retirement, when you might be in a lower bracket.

Catch‑Up and Roth Rules for High Earners

Starting in 2026, the SECURE 2.0 law adds some new catch-up rules for high earners.

Who counts as a “high earner” for catch-ups? If your wages in the prior year are above a certain threshold (typically $145,000–$150,000, adjusted for inflation), you’ll have to make your catch-up contributions as Roth (after-tax) if your plan offers that option.
Impact if the plan has no Roth feature: If a plan does not permit Roth contributions, high earners who meet this wage threshold may not be able to make catch‑up contributions at all, even if they are otherwise eligible by age.
The trade-off: Roth catch-up contributions won’t lower your tax bill now, but those qualified distributions in retirement are generally tax-free—giving you more options for managing taxes down the road.

For high earners, these changes mean the benefits shift a bit—from immediate tax savings to more long-term, tax-free growth. It’s a good idea to review your mix of pre-tax and Roth contributions each year to see what works best for you.

HCE Rules and Plan Design Constraints

If you’re considered a highly compensated employee (HCE), there may be extra limits on how much you can contribute pre-tax or as Roth, especially if your company’s plan struggles to meet IRS nondiscrimination testing.

HCE definition: In many plans, an HCE is generally someone whose compensation exceeds an IRS threshold (for example, 160,000 dollars for 2025, indexed over time) or who meets certain ownership or officer criteria.
Testing limits: If rank‑and‑file participation is low, HCEs may see their elective deferrals limited or even partially refunded to keep the plan in compliance with nondiscrimination rules.
Plan features that help include safe-harbor 401(k) designs, automatic enrollment, and enhanced employer contributions, which can allow HCEs to contribute up to the full IRS limit by raising overall participation.

If you routinely receive corrective distributions due to HCE status, it may be worth asking your employer about plan design options or examining whether after‑tax contributions, deferred compensation plans, or IRAs complement your workplace plan.

Beyond the Core Plan: After‑Tax and Supplemental Options

Once you have used all available pre‑tax and Roth deferrals, some plans allow additional ways to save through the workplace.

After‑tax 401(k) contributions: Certain plans allow after‑tax (non‑Roth) contributions above the standard deferral limit, up to the overall 72,000‑ or 80,000‑dollar cap with employer contributions; these amounts may later be eligible for conversion to a Roth IRA in what is often called a “mega backdoor Roth,” subject to rules and plan design.
Nonqualified deferred compensation (NQDC): Some employers offer NQDC plans for executives and other high earners, allowing part of current compensation to be deferred and taxed in a future year, with different risks and protections than those of qualified plans.
IRAs and backdoor Roths: High earners who are phased out of direct Roth IRA contributions sometimes use non‑deductible traditional IRA contributions followed by Roth conversions, coordinating this with workplace savings and tax planning.

These tools have additional complexities and possible risks, so they are best evaluated with a professional who understands both your employer’s plan rules and your overall tax picture.

Disclosure

This material is for informational and educational purposes only and is not intended as individualized investment, tax, or legal advice. It does not constitute a recommendation to participate in any particular plan, to contribute at any specific level, or to use any specific strategy such as Roth conversions, after‑tax contributions, or deferred compensation arrangements. Contribution limits, income thresholds, and tax rules are subject to change and may vary based on plan documents and individual circumstances. Before making any decision about workplace plan contributions or related strategies, you should review your plan materials and consult with a qualified financial or tax professional.

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High Earners: Maximizing Tax Deferral in Workplace Retirement Plans

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