Only 5% Of Eligible Investors Make Retirement Plan Catch-Up Contributions
Only a tiny percentage of investors who contributed to their retirement plans are making catch-up contributions, according to new research from the Public Retirement Research Lab, a data tracker for defined contribution plans. For investors—especially those earning $150,000 or more—the failure to catch up represents a significant missed opportunity to build tax-free retirement income, especially when new regulations for the treatment of after-tax contributions come into play.
Catch-up contributions are designed for workers age 50 and older, and allow savers to exceed standard deferral limits in their final working years. In 2023, eligible workers could contribute an additional $7,500 on top of the $22,500 base limit. Yet despite that opportunity, only 5% of eligible participants took advantage of it, the data firm said.
For advisors, that gap translates into lost compounding, lost tax-free accumulation, and lost tax-planning opportunities. And that will be especially true for higher earners after major regulatory changes take effect this year. In 2026, under the SECURE 2.0 Act, workers who earned more than $150,000 in the prior year will be required to make all catch-up contributions on an after-tax basis to Roth 401(k) plans. Traditional pretax catch-up contributions will no longer be permitted for that group.
Such catch-up rules used to be an optional planning strategy for high earners but from here on in will be required. Since the Roth allows them to grow savings tax-free, these high earners are missing an opportunity by not electing to make catch-ups. Roth contributions are funded with after-tax dollars, but qualified withdrawals—including all investment growth—are tax-free. So the new rules raise the cost of inaction.
The research highlights how wide the participation gap remains. According to the research lab, 36% of contributors were eligible to make catch-up contributions in 2023, but only 5% of those age 50 or older actually did so. The analysis reviewed data from more than 900,000 public-sector participants across 208 retirement plans.
Higher earners did participate at higher rates, but the numbers still point to substantial underuse. Among eligible participants earning $150,000 or more, only 24% made catch-up contributions. That means more than three-quarters of eligible high earners could leave the opportunity for lifetime tax-free Roth catch-ups unused.
For affluent clients who expect to face the same or higher tax rates in retirement, the tax-free treatment can be far more valuable than a current-year deduction. They allow older, high-earning workers to lock in today’s tax rate while reducing future uncertainty. They can also help retirees manage required minimum distributions, Medicare premium thresholds, and overall taxable income later in life. For many clients, Roth contributions are less about saving more and more about maintaining control.
For Roth catch-up contributions to take hold in 2026 and beyond, retirement plans must offer a Roth feature to keep participants compliant under SECURE 2.0.
The good news is that most plans are already prepared. According to the Plan Sponsor Council of America’s latest annual survey, 95.6% of 401(k) plans now offer a Roth contribution option—the highest level ever recorded and a sharp increase from a decade ago. Nearly all plans report they are preparing to implement the Roth catch-up requirement by 2026.
But availability does not equal participation. Vanguard data shows employee usage of Roth options remains modest, even when plans offer them. The Public Retirement Research Lab findings reinforce that point. The infrastructure is largely in place. Tax-smart investing behavior is not.
That disconnect is where advisors come in. Clients nearing retirement often underestimate the value of catch-up contributions or assume they can address the issue later. Under SECURE 2.0, waiting is no longer an option for high earners.
Employer behavior is also shifting and may help accelerate adoption. About 20% of plans now offer or plan to offer Roth employer matching contributions, a feature authorized under SECURE 2.0. The adoption of these features is accelerating, but so is the complexity. Advisors can add meaningful value by ensuring clients do not miss opportunities for tax-free matches and long-term tax optimization.