As we approach 2026, there are significant changes coming to retirement plans that every Montana investor and employer should be aware of. These changes, stemming primarily from the SECURE 2.0 Act of 2022 and subsequent IRS regulations, will impact how you plan for withdrawals, catch-up contributions, and distributions from your IRAs and 401(k)-type plans. At Spitfire Financial in Billings, we believe understanding the landscape now helps you avoid surprises later.
What’s Changing in 2026
Mandatory Roth Treatment for “Catch-Up” Contributions by High Earners
Beginning in the 2026 tax year, if you participate in a 401(k), 403(b), or governmental 457(b) plan and you earned more than $145,000 (from your employer, as reported in Box 3 of your W-2 in the prior year), then any catch-up contributions (those extra elective deferrals allowed for participants age 50 +) must be made as Roth (after-tax) contributions, rather than traditional pre-tax.
In short: higher-income older workers will lose the option of making pre-tax catch-up contributions in many cases, unless the plan provides no catch-up contributions if Roth isn’t offered.
“Super Catch-Up” Increase for Ages 60-63
For participants who are age 60-63 in the calendar year, the law allows a higher catch-up contribution limit. While this provision took effect in 2025, it remains especially relevant going into 2026.
This means that those in the 60-63 age band can defer more beyond the standard “age 50+” catch-up amount. For example, for 2025 the limit for that age group was $11,250 (versus $7,500 for age 50+ general catch-up) in many plans.
Contribution Limit Increases & Inflation Adjustments
The regular employee elective deferral limit (for 401(k), 403(b), etc) is projected to rise in 2026—early forecasts suggest an increase from $23,500 in 2025 to around $24,500 in 2026. Also, the cost-of-living adjustments (COLA) framework remains in place, meaning contribution and benefit limits will continue to adjust for inflation
Distribution & Required Minimum Distribution (RMD) Changes
While many headlines focus on contribution and catch-up rules, distribution rules (especially for IRAs) are also evolving. For example, RMD penalties have been reduced under prior law changes: the penalty for failing to take an RMD fell from 50 % to 25 % (and as low as 10 % if corrected in time). Additionally, some rules originally scheduled to apply earlier have been delayed until 2026.
What This Means for Billings and Montana Investors
For clients of Spitfire Financial here in Billings and across Montana, these changes matter locally because your employer retirement plan, your age, your income, and your investment horizon all interact with these rules. Here are some takeaways:
- High-earning (>$145K) older workers might want to review their 401(k) plan’s catch-up contribution rules now. If your plan does not offer Roth contributions, you may lose the option to make traditional catch-up contributions beginning in 2026.
- Those age 60-63 still have a powerful “super catch-up” option—but you need to coordinate with your employer plan and your tax advisor to maximize it.
- Regular contribution limits rising means you may be able to save more, but you still need to align this with your retirement timeline, risk tolerance, and tax expectations in Montana.
- Distribution planning becomes more important. With RMD rules shifting and the time-value of tax changes altering the landscape, legacy planning, IRA rollovers, and the timing of distributions require renewed attention.
- Local employers (in Billings, Yellowstone County, the broader Montana region) offering 401(k) or 403(b) plans may need to adjust plan documents, payroll systems and employee communications to reflect these law changes. It’s a compliance and employee-education task.
Action Steps for You and Your Retirement Plan
- Check your plan’s design: Contact your plan administrator and ask whether your 401(k) or 403(b) plan allows Roth catch-up contributions, and whether it will apply the “mandatory Roth” rule for high-earners beginning in 2026.
- Review your income and age profile: If you’re nearing age 50 or already over it, and if your W-2 wages from one employer will exceed the $145,000 threshold, you should model both the pre-tax and Roth treatment of your catch-up contributions.
- Consult your tax advisor: The shift from pre-tax to Roth for catchups changes when you pay tax—upfront versus deferred. Depending on your tax bracket now and expected future bracket, the optimal approach may differ.
- Update your withdrawal strategy: If you have IRAs or anticipate required distributions, make sure your retirement cash flow projections reflect any changes to RMD rules, penalty structures, or distribution timing.
- Communicate with your Montana employer or board: If you are an employer or serve on a board of a nonprofit or public entity in Montana, start planning administrative changes now—plan document amendments, communication to employees, payroll system testing.
- Monitor IRS announcements and inflation adjustments: While many rules are in effect for 2026, some details (such as adjusted thresholds for the high-earner rule or exact contribution limits) may be finalized later in the year.
Why Early Planning Pays Off in Billings
In our region, retirement advisers often see clients who are “behind schedule” or who have not anticipated tax-law changes. By beginning now, rather than waiting for 2026, you give yourself time to adjust your savings strategy, make contributions consistent with your retirement horizon, and align withdrawal plans for future income in Billings and beyond.
For example, a client earning $160,000 in Billings, age 52, and contributing catch-up amounts now may need to convert catch-up contributions to Roth after 2026—thereby triggering more tax now but less tax later. Having this conversation early allows you to model and decide whether front-loading Roth contributions, adjusting salary deferrals, or rebalancing your savings makes sense.
Final Thoughts
The retirement-savings rule-set is evolving. Changes coming in 2026—particularly the mandatory Roth catch-up for high-earning older workers, the increased “super catch-up” for ages 60-63, and ongoing inflation-indexed contribution limit adjustments—will affect how Montanans save and withdraw for retirement.
At Spitfire Financial in Billings, we recommend you begin discussions now: with your employer plan, your tax advisor, and your retirement-planning team. The sooner you integrate these changes into your planning, the better you’ll be positioned for the coming decade.
If you’d like to schedule a retirement-planning review specific to your Montana situation—including your employer plan design, your projected income, and your withdrawal strategy—we are ready to work with you. Reach out to our team today.
Spitfire Financial is located in Billings, Montana. This material is for general informational purposes only and does not constitute personalized tax or investment advice.