January 2026 | Peterson Wealth

Losing Pensions or Empowering Caregivers?

Posted on January 30, 2026February 3, 2026 by Scott M. Peterson, ChFC®

A generation ago, retirees didn’t have a lot of choice when it came to how they would structure their retirement income. They had Social Security, and their guaranteed monthly pension checks were provided by the employer they had dedicated thirty years of their lives to. In 1975, almost 80% of retirement income came from Social Security and defined benefit pension plans. The employees had little opportunity to contribute towards their own retirements through payroll deduction programs like 401(k)s. Employer-provided pensions are technically defined benefit pension plans. For ease of understanding, I will refer to these plans as “pensions.”

The Shift from Pensions to 401(k)s

The various plans where employees and employers can deposit into individual accounts are called defined contribution plans. Again, for ease of understanding, I will refer to all the various defined contribution plans as 401(k)s. The 401(k) was born in 1978, and it gained immediate popularity and started replacing the traditional pension plan. In 1975, there were 103,346 pension plans in the U.S.; today, there are fewer than 45,000. Additionally, the majority of the 45,000 remaining pension plans are found in the public sector with states, municipalities, universities, and school districts. It is estimated that there remain fewer than 7,000 private sector pension plans in the United States.

Following the national trend, Intermountain Health announced on January 20, 2026, that it is freezing its pension plan. Freezing a plan does not mean that employees will lose their pensions; it means that Intermountain Health will stop funding or adding more money to existing plans. Participants of the pension will continue to have the choice of receiving a guaranteed monthly income when they retire, or they will be able to roll the value of their pension into an IRA. Like other corporations, Intermountain Health decided to use the money that was being allocated to fund their pension in alternative ways, which would be more beneficial to their caregivers.

There are three reasons why companies are transitioning from the traditional pension plan to 401(k)s

Pension plans have become too burdensome for most employers to maintain.

The decline of the traditional pension plan began in the 1970s when the government tried to rectify the abuse it saw in corporate America. They did this by passing the Employee Retirement Income Security Act (ERISA). While ERISA has corrected much of the corporate abuse over the years, it also introduced many complicated laws that are hard to comply with. To avoid dealing with the politics and complexities of ERISA, many companies decided to do away with their pension plans. They were never a mandatory offering for companies, and it was easier to do away with the plans than to conform to ERISA’s complex regulations.

There is a tremendous liability for companies that provide pension plans.

Companies that offer these plans must, by law, provide current retirees with their pre-determined retirement benefit every month, even if the pool of money the pensions are paid from underperforms. Pension payments, especially during turbulent economic times, have the potential to put a company out of business. As companies calculate the risks, the costs, and the difficulty of maintaining pension plans, most companies conclude that there are better ways to provide value to their employees.

Monthly pension payments come from an investment portfolio managed by the pension plan. Many pension plans don’t have sufficient money in their plans to pay projected obligations; or, in other words, they are underfunded. In fact, the latest studies indicate that pension plans across the United States are underfunded by hundreds of billions of dollars. Intermountain Health’s pension plan is fully funded. The management of Intermountain Health’s pension plan has done an excellent job saving and investing to ensure that there will be sufficient dollars to be able to pay all the current and future obligations that it has to their employees.

Times have changed.

Employers recognize that pension plans do not protect and benefit their employees as they once did. Two societal changes have made pension plans less beneficial:

First, we have become a much more mobile society.

Gone are the days when an employee worked for one company for an entire career. Pension plans rewarded the long-term employee with a monthly retirement check, but these rewards came with a cost— not of money, but of time. The price to be eligible for these plans was decades of loyalty to a single company.

401(k) plans of today are much better equipped to deal with the shorter duration that most workers commit to a single employer. Even if employees work for an employer for a short amount of time, they can roll 100% of their contributions to a new 401(k), or to an IRA, upon terminating employment with the employer.

Second, longer life expectancies.

Inflation has always been with us, but this generation has a unique challenge when it comes to inflation. It is rare to find a private sector company with a cost-of-living benefit included within its pension plan. In other words, the monthly payments that retirees receive from their pension are usually not adjusted for inflation. Intermountain Health’s pension does not adjust for inflation. If you only live 10-15 years in retirement, as did previous generations, inflation does not have time to become a lifestyle-changing problem. Many of today’s retirees will live thirty years or more in retirement, and thirty-year retirements are destroyed by inflation. For example, if you start your retirement receiving a $3,000 dollar per month pension payment, and your payment is not adjusted for inflation, your monthly payment will stay $3,000 until you die. The historical inflation rate in the United States has been close to 3%, and at just a 3% inflation rate, the $3,000 monthly payment will only be able to buy the equivalent of $1,200 worth of goods and services at the end of a thirty-year retirement. That is a sixty percent cut in pay. Because of inflation and longer life expectancies, traditional pension plans do not furnish the security that they were originally intended to provide.

Before we get into the impact that this change will have on caregivers, I first want to remind you of the benefits that come with participating in a 401(k) plan.

Key Benefits of 401(k) plans:

Tax Savings Now (Traditional 401(k)): Contributions are deducted from your paycheck before taxes, reducing your current taxable income and potentially lowering your tax bracket.

Tax-Deferred Growth: Your investments grow without being taxed each year, letting your money compound more effectively.

Tax-Free Withdrawals (Roth 401(k)): If you choose the Roth option, you pay taxes now, but qualified withdrawals in retirement are completely tax-free.

Employer Match: Many employers contribute money to your account, often dollar-for-dollar up to a certain percentage of your salary – essentially free money.

Compound Interest: Starting early allows your earnings to generate their own earnings, significantly boosting your savings over time.

Convenience: Contributions are automatically taken from your paycheck, making saving effortless and disciplined.

Higher Limits: You can save more in a 401(k) annually compared to an IRA.

Portability: You can take your 401(k) with you when changing jobs, often by rolling it over.

The Impact of Freezing the Pension and Enhancing the 401(k) for Intermountain Health Caregivers

Since the announcement of this change, I have heard some Intermountain Health employees express that they are “losing their pension.” That statement is false and puts a negative spin on what I believe to be a very positive development. Intermountain Health is simply reallocating resources from the pension plan to the employees’ 401(k) plans. Beginning January 2027, Intermountain Health is going to pay all caregivers an additional 2% of their salary to their 401(k). Adding this, along with the already generous match that Intermountain Health provides to its 401(k) plan participants, makes Intermountain Health’s 401(k) one of the elite 401(k) plans in the country. Additionally, the company is allowing its employees to rollover the value of their pensions, while they are still employed, to an IRA or to their existing 401(k)s at Intermountain Health.

By freezing the pension plan and enhancing the 401(k) plan, Intermountain Health is putting its employees in charge of their own destiny. Caregivers should be excited about the opportunity to have more control over their own finances. Granted, some caregivers will need to be more thoughtful than they have been in the past as they manage their own 401(k)s. Some will need to become better educated. Even though this change will place more responsibility upon caregivers to manage their own retirements, there is a tremendous upside for those who learn, take advantage of this opportunity, and utilize the tools and the resources that they are given to enhance their retirement and grow their 401(k).

Intermountain Health is dedicated to the personal success of its caregivers, and they recognize that additional educational opportunities will need to be offered to ensure a successful transition and to prepare employees to have the best possible retirement. Intermountain Health has asked our company, Peterson Wealth Advisors, to teach the same class that we teach to employees at Brigham Young University and to the alumni of Utah Valley University to Intermountain Health caregivers. This online class helps participants to make sound decisions regarding their 401(k)s now and prepares future retirees with the knowledge they will need to make the best decisions at retirement. The class objective is to teach attendees how to create a tax-efficient, inflation-adjusted stream of income that will last throughout retirement.

Details as to the timing of the class will be forthcoming.

Preparing for Healthcare and Long-Term Care Costs in Retirement

Posted on January 29, 2026January 29, 2026 by Carson Johnson, CFP®, CRPC™, NSSA™

When most people imagine retirement, they picture freedom, flexibility, and finally having the time to focus on what matters most – family, travel, service, or long-delayed hobbies. But one concern often looms larger than most: healthcare costs.

As a retirement advisor, I’ve had countless conversations with clients who are worried about what would happen if their health declined. “What if I end up in a nursing home? Will I be able to afford it? How do I prepare financially for a long-term care event?”

These are legitimate fears. But with the right strategy, you don’t have to face them unprepared.

Understanding the Rising Costs of Healthcare in Retirement

Healthcare inflation continues to outpace general inflation, making everything from prescriptions to long-term care more expensive each year. According to the Department of Health and Human Services, roughly 70% of adults over 65 will require some form of long-term care during their lifetime.

Too many retirees enter retirement with plans that don’t grow with inflation. If your income doesn’t adjust for rising costs, it simply won’t last. That’s why a forward-thinking financial strategy is critical.

How the Perennial Income Model™ Helps You Plan for Healthcare Expenses

At Peterson Wealth Advisors, we use a proprietary planning approach called the Perennial Income Model™. It segments your retirement assets into different time-based portfolios, each designed for a distinct stage of retirement. One of the most important (and often overlooked) segments is the final one: what we call the “legacy segment.”

The Legacy segment is designed to preserve assets to act as a financial buffer. This buffer can help cover large, unexpected expenses like a long-term care stay or extended medical treatment. It’s part of a larger strategy to ensure:

Predictable income early in retirement
Growth in later years to outpace inflation
A financial cushion for healthcare and emergencies

This approach offers peace of mind in a phase of life that can otherwise be filled with uncertainty.

Coordinating Healthcare, Medicare, and Taxes

Planning for healthcare doesn’t happen in isolation. One of the most misunderstood facts about Medicare is that your premiums are directly tied to your taxable income. Take too much out of your IRA or retirement accounts in one year, and you could bump yourself into a higher Medicare bracket, meaning you could be paying significantly more for coverage.

This is why retirement planning must include a tax strategy. At Peterson Wealth, we coordinate investment, tax, and income planning to help our clients avoid these hidden costs and make informed decisions that support long-term financial health.

Medicare Alone Won’t Cover It All

Many people assume Medicare covers long-term care. This is not the case. Understanding what Medicare does and does not cover is essential. That’s why we help clients navigate questions like:

When should I enroll in Medicare?
Should I choose a Medigap or Medicare Advantage plan?
How do my withdrawals affect my premiums?

Without this level of coordination, it’s easy to overlook opportunities or incur unnecessary expenses.

Should You Buy Long-Term Care Insurance?

This is a common conversation I have with clients. Most people know that 70% of retirees will need some form of long-term care, but they often underestimate the duration and cost.

While long-term care insurance can be a good fit for some, premiums can be expensive, especially if you wait too long to apply. For many of our clients, the preferred option is self-insuring by reserving a portion of their assets within the legacy segment of their Perennial Income Model™.

It’s not about fear, it’s about preparation. Having a strategy gives you choices, and choices are empowering.

Your Health and Your Wealth Protected

Healthcare costs will continue to rise, but they don’t have to derail your retirement. By building a plan that includes income segmentation, inflation protection, tax coordination, and a healthcare reserve, you can face the future with confidence.

That’s what the Perennial Income Model™ is all about. When we plan well today, you won’t have to worry about tomorrow. You’ll be free to focus on what really matters—living well, giving back, and enjoying the retirement you’ve earned.

Let’s make sure your retirement plan supports your health and your peace of mind. Schedule a consultation with a Peterson Wealth Advisor at petersonwealth.com.

Smart Year-End Tax Moves

Posted on January 29, 2026 by Alek Johnson, CFP®

The final stretch of the year gives you a short window to make choices that still count on this year’s paperwork. Many of the best decisions are timing decisions, and they can shape what lands on your return when the calendar closes on December 31st.

A smart approach starts with clearly understanding your options. From there, you are looking for a few clean actions that fit your accounts, your cash flow, and your records; filing season feels straightforward, and your return reflects choices you made on purpose, not ones you made under pressure.

The Three Account Buckets That Drive Most Decisions

Year-end decisions get easier when you sort your accounts into three buckets, each with its own rules and tradeoffs:

Tax-deferred accounts

This bucket includes accounts like 401(k)s, 403(b)s, and traditional IRAs. Contributions generally reduce your taxable income in the year you make them, and the money can grow without annual taxation on interest, dividends, or growth while it stays inside the account.

The tradeoff happens at distribution time: money coming out is typically 100% subject to income taxes. Any money coming out before age 59½ can also trigger a 10% early-withdrawal penalty.

Required minimum distributions (RMDs) also apply to this bucket starting at age 73 or 75, depending on your birth year, and there is an exception for someone still working past those ages if they have a 401(k) they are actively contributing to.

Tax-free accounts

Accounts like Roth 401(k)s and Roth IRAs are funded with after-tax dollars, so contributions do not reduce taxable income today. The benefit shows up later: qualified withdrawals can be tax-free, including growth. The same age 59½ guideline can still apply to avoid the 10% penalty on growth, yet these accounts are not subject to RMDs, which means the money can remain invested for life if that fits your plan.

Taxable accounts

Taxable brokerage accounts work more like a bank account, a high-yield savings account, or a CD from a tax standpoint. They are funded with after-tax dollars, and the main benefit is flexibility: you can take money out at any point, for any reason, without the age 59½ restriction. The tradeoff is that interest, dividends, and capital gains are taxable in the year they are earned.

How Your Tax Return Gets Built

A clear way to think about your year-end choices is to follow the same path the IRS uses on paper:

Add up all sources of income: Start by totaling wages, salaries, rental income, dividends, and interest to reach gross income.
Subtract “above-the-line” adjustments to reach AGI: Certain items reduce income before you ever decide whether to itemize. Examples may include, but are not limited to, IRA contributions, 401(k) contributions, HSA contributions, and student loan interest. This step gets you to Adjusted Gross Income (AGI), a number that drives many thresholds inside the tax return.
Choose your deduction path: Compare itemized totals to the standard deduction, then subtract whichever is higher to arrive at taxable income. This is where many year-end actions either help or don’t help, depending on which route you end up taking.
Apply brackets and rates, then credits: Federal brackets range from 10% to 37%, and your final result also depends on your state’s income tax rules. The bracket calculation applies to taxable income, and then credits such as child and education credits reduce the bill dollar-for-dollar. The result is what you owe or what you get back.

Why Itemizing Has Been Harder, and the Updates That Can Change the Math

Itemizing has been harder for many households simply due to how often the standard deduction wins the comparison. That reality changes the way many people experience generosity on their return: you can still give faithfully, yet the giving may not change the tax calculation in years when the standard deduction is larger than the itemized total. This is why timing strategies show up so often at year-end: the goal is to line up deductions in a way that makes itemizing possible in the years it makes sense.

Recent legislative changes have also changed how taxpayers need to weigh their options. One change is a new age-based deduction: individuals over 65 can receive an additional $6,000 deduction (or $12,000 for married couples). The deduction has income-based phaseouts ($75k–$175k for single filers; $150k–$250k for married couples), and it is received in addition to either the standard deduction or itemized deductions.

Another update is the state and local taxes (SALT) cap. The cap increased from $10,000 to $40,000, which can make state tax deduction totals more meaningful for households with larger property taxes and other state and local taxes. That higher cap can increase the odds of itemizing pencils out.

The following will happen starting in 2026:

For those who do not itemize, an extra $1,000 charitable donation deduction per person, or $2,000 for a couple, as an add-on when taking the standard deduction
Charitable donation deductions will only be available for the portion above 0.5% of AGI. For example, a $100,000 AGI would mean donations must exceed $500 before any deductible amount begins.

Bunching: One Timing Change That Can Create More Deduction Power

A common year-end idea is simple: move the timing of your donations so that your itemized total clears the hurdle in one year, then take the higher standard deduction the next. This approach does not require you to give more, and it does not require you to change what you support. It focuses on when you write the checks:

Bunching Example 1

A household has about $14,000 each year from other itemized items, and then they give $12,000 each year. That puts them at $26,000 of total itemized deductions in 2024 and $26,000 again in 2025. In the example, both years end up below the standard deduction, so they take the standard deduction twice. Over the two years, their combined deductions total $60,700.

Bunching Example 2

The household keeps the same total generosity across two years, but they change the timing. They give double their normal amount in 2024 (i.e., $12,000 x 2 = $24,000) and $0 in 2025. In 2024, they still have the $14,000 of other deductions, so $14,000 + $24,000 = $38,000, which is high enough to itemize that year. In 2025, they take the standard deduction. The two-year result in this case is $69,500 of total deductions (one year itemizing and one year taking the standard deduction), which is $8,800 more than Example 1, without increasing charitable giving.

Donor-Advised Funds (DAFs): Take the Deduction Now, Give on Your Timeline

A donor-advised fund (DAF) is a charitable account where you contribute, take the deduction in that year if you are itemizing, and then decide later which organizations receive grants. This is a timing tool for charitable contributions when you want more control over when the deduction lands versus when the charities receive the money.

A DAF really helps in a specific situation: you want to bunch deductions into one year, yet you do not want to change the steady monthly or annual support your organizations rely on. A DAF lets you “front-load” the contribution for deduction purposes, then send grants out over time.

Funding a DAF can be done with cash, and it can also be done with appreciated stock. In the example discussion, the account can remain invested while you decide when to distribute grants, which can support year-end planning without forcing you to rush the “where should it go?” decision before the calendar closes.

Donating Appreciated Shares: A Cleaner Way to Give From Taxable Accounts

If you hold shares in a taxable account that have gone up in value, donating those shares can be more tax-efficient than selling the shares and donating cash. The key difference is what happens to the gain.

When you sell, the gain becomes taxable. When you donate the shares directly, you can often avoid triggering that gain in the first place. This strategy can be a meaningful lever in strong market years, especially when you already plan to give, and you want to keep more dollars working for you instead of turning a donation into an avoidable tax event.

This approach also pairs cleanly with a DAF. You can contribute shares to the DAF, take the deduction in the year you contribute (when itemizing applies), then send grants out later. For many households, this is simply a better use of investments you already own, rather than selling first and creating a taxable gain you did not need to realize.

Qualified Charitable Distributions (QCDs): The IRA-to-Charity Move That Can Lower Taxable Income

A qualified charitable distribution (QCD) is a direct transfer from an IRA to a qualified charity. The amount sent to the charity is excluded from income, which can reduce what shows up as taxable for the year.

A QCD can help in a few ways at once. It can lower taxable income, it may reduce how much of your Social Security becomes taxable, and it can create a tax benefit even in years when you are not itemizing. QCDs also count toward required minimum distributions, so dollars that would have been forced out of your IRA can be directed to charity instead.

The rules have to be followed closely for the transaction to be treated correctly:

You must be older than 70½ at the time of the transfer
The distribution must come from an IRA (not a 401(k) or 403(b))
The money must go directly from the IRA to the charity
The 2025 limit is $108,000 (indexed for inflation)
The reporting must be handled correctly so it is not treated as taxable income

For many retirees, this is one of the most practical year-end tools available, and it can create real tax savings when it fits your giving habits and your account structure.

Roth Conversions: A Powerful Lever, With a Real Cost

A Roth conversion is not a “must-do.” It’s a decision that can be great in the right tax situation and completely wrong in another. It involves taking pre-tax money (often from traditional IRAs) and moving some or all of it into a Roth account so the dollars can grow tax-free going forward.

That move matters most when your goal is long-term flexibility in retirement. The tradeoff is that a conversion increases the amount of income you’re recognizing in the conversion year, which can change where you land in a tax bracket and what you pay in total for that year. The same conversion can look cheap in one year and expensive in another.

Roth Conversion Example

Picture a year where your income drops, maybe you retire mid-year, take unpaid time off, or step away for family, yet your spending plan stays the same. You need $12,000 per month in your normal working years, and $7,000 per month during that lower-income year. When your income is higher, and you’re in the 22% bracket, converting $44,000 creates a $9,680 federal tax cost. When your income is lower, and you’re in the 12% bracket, converting the same $44,000 creates a $5,280 cost. Timing is the lever here: doing the conversion in the lower-income year lowers the federal tax cost by $4,400.

Please Note: State taxes can matter too. Converting in a state with no income tax and then moving to a higher-tax state could reduce the state-side bite on the conversion. Sometimes the state side becomes the difference-maker in multi-year planning.

When You Need to Think Twice

Conversions deserve a “whole-picture” check before you commit, especially if any of these are true:

You expect a better tax window later: Converting in a high-income year can be less appealing if you anticipate lower income and lower rates in a future year.
You’d be forced to use retirement dollars to pay the tax: Paying the tax from the conversion itself reduces how much ends up in Roth, which can weaken the long-term benefit.
You plan to use the funds soon: The move often fits best when the converted dollars can remain invested for many years.
You’re close to, or already in, RMD years: The required distribution generally needs to happen first, and that can narrow your conversion flexibility for the year.
Other costs move with reported income: Increasing reported income can affect items tied to the tax return, including credit phaseouts, Social Security taxation, Medicare premiums, and marketplace subsidy calculations.

Tax-Loss Harvesting: Using Down Markets Intentionally

Market declines can feel discouraging, but they can also create planning opportunities. Tax-loss harvesting uses losses inside taxable accounts to reduce the tax impact of gains and create flexibility for future years.

The benefit comes from how losses are treated on your return. Realized losses can offset realized gains dollar for dollar. If losses exceed gains, up to $3,000 can be used against other income, and remaining losses can be carried forward into future years. This creates flexibility across multiple tax years, especially when markets move unevenly or when you plan to sell appreciated holdings later.

Please Note: The wash sale rule is the guardrail. Selling at a loss and repurchasing the same or a substantially identical investment within 30 days before or after the sale disqualifies the loss. Staying invested requires careful replacement choices during that window.

Year-End Tax Moves FAQs

1. If I do bunch, should I consider using a donor-advised fund?

A donor-advised fund can support bunching while preserving consistency in giving. You take the deduction in the funding year and decide on grants later.

2. When does a Roth conversion usually not make sense?

Several situations warrant caution: when you’re in a high bracket now and expect a lower bracket later, when you don’t have outside funds to pay the tax, when you’ll need the money soon, or when the added income creates collateral issues (credit phaseouts, Medicare premiums, Social Security taxation, marketplace subsidy impacts, and more).

3. What is the wash sale rule, and why do people trip over it?

The wash sale rule prevents you from claiming a loss if you buy the same or substantially identical security within 30 days before or after the loss sale. That creates a practical 61-day window to watch (i.e., 30 days preceding the sale, 30 days following the sale, and the sale day itself).

4. If my losses are bigger than my gains, do I get any extra benefit?

Yes. After offsetting gains, you can deduct up to $3,000 per year against ordinary income, and remember, you can carry forward additional losses to future years.

5. What does a donor-advised fund actually do?

A donor-advised fund is an account designed to hold your charitable dollars until you decide where and when to grant them. You contribute (cash or even appreciated shares), receive the deduction in the contribution year, and then decide on the giving schedule afterward.

6. If I am subject to required minimum distributions (RMDs), can I use a qualified charitable distribution (QCD)?

Yes, when you meet the age rule, and you’re giving to qualified charities. A QCD is an IRA-to-charity transfer that can count toward your RMD and keep the transferred amount from being included in taxable income. The transfer has to go directly from the IRA to the charity, and it must come from an IRA rather than a workplace plan.

How We Help People Make Smart Year-End Tax Moves

Year-end planning works best when decisions are connected instead of isolated. Bunching, charitable strategies, Roth decisions, and investment-related moves all affect one another, and the order you apply them can matter just as much as the moves themselves.

Our financial advisory team helps you look at the full picture: your accounts, your income timing, your giving goals, and how each decision shows up on your return today and in future years. The focus stays practical, grounded, and tailored to your situation rather than built around generic rules.

If you want help evaluating which year-end moves actually fit your numbers, you can schedule a complimentary consultation call. That conversation is simply about clarity, like what matters now, what can wait, and how to approach the final weeks of the year with confidence.

Catch-Up Contributions Are Changing Under SECURE 2.0: Will Yours Be Forced Into Roth?

Posted on January 29, 2026 by Ali McFadden

Over the last several months, we’ve had more clients ask about a quiet change coming to 401(k) catch-up contributions.

If you are age 50 or older and still working, catch-up contributions to 401(k)s are one of the best ways to boost retirement savings later in your career. The SECURE 2.0 Act didn’t take that option away, but for higher earners, it does change how catch-up contributions must be made.

Here is a walkthrough of what’s happening and what we recommend watching for.

What is a “catch-up” contribution?

Once you turn 50, your workplace plan typically lets you contribute an additional amount on top of the standard employee deferral limit.

For 2026, the IRS said the standard catch-up amount for most 401(k)/403(b)/governmental 457 plans increases to $8,000.

And for workers age 60–63, the SECURE 2.0 Act allows an even higher “super catch-up” amount. For 2026, that higher total catch-up is $11,250.

The big SECURE 2.0 change for higher earners

Now here is the big change: individuals who made over $150,000 in 2025 will be required to make Roth catch-up contributions.

Roth catch-up requirement (based on prior-year wages)

If your prior-year wages (FICA wages) with the employer that sponsors your 401(k) plan are above a certain threshold, then all of your catch-up contributions to that 401(k) plan must be Roth (after-tax) and not pre-tax.

For catch-ups made in 2026, the IRS announced the wage threshold (for 2025 wages) is $150,000.

Important notes about the $150,000 threshold

A few important notes:

This is based on your wages with that employer, not household income.
This wage threshold is indexed for inflation, so it may increase over time.

When will this actually hit payroll?

The IRS issued final regulations in 2025 and said the rules generally apply starting in 2027, while also allowing plans to implement earlier as long as they are making a reasonable, good-faith effort to comply.

Bottom line: your company may start communicating changes in 2026, with most plans tightening the actual implementation as 2027 gets closer.

What this means in real life

If you’re impacted, the change usually shows up in one of two ways:

Catch-up contributions are treated as Roth (either because the plan requires it or payroll automatically routes catch-up dollars to Roth)
If the plan doesn’t offer a Roth option, catch-ups may be temporarily unavailable for higher earners until the plan is updated (a potential administrative block, not something you did wrong)

Will your take-home pay change?

And yes—if your catch-up dollars switch from pre-tax to Roth, your take-home pay may slightly drop because you’re no longer getting the immediate tax deduction on that portion.

What we recommend

If you’re still working and you’re 50 or older, here are the simple next steps:

Next steps checklist

Check your wages: If your prior-year wages were around (or above) the threshold, expect your catch-up contributions to switch from pre-tax to Roth.
Log in to your 401(k) and see if Roth is an option (most 401(k) providers allow Roth contributions, but check with your individual provider to be sure).
Watch your plan communications in 2026—this will likely be rolled out through HR/payroll updates.
Coordinate the change with your tax professional. For some households, more Roth dollars are a no-brainer. For others, it may increase taxable income today, so you may want to review paycheck withholding, look at how much we convert to Roth each year, and keep an eye on Medicare IRMAA thresholds (since higher income may result in increased Medicare premiums down the road).

Final thought on Roth Catch-Ups

We don’t expect this change to be “life-altering” for most people, but it can be confusing the first time a paycheck changes or a catch-up election is rejected.

If you’re still maxing out your plan (or you’re close), this is a great moment to make sure your retirement savings strategy and tax plan are still working together.

If you’d like help confirming whether Roth catch-ups will apply to you (and what to adjust according to your near and long-term tax plan), we’re happy to walk through it with you. Just book a consultation with us below, and we will take a look together

Planning to Live: A New Vision for Retirement With Meaning and Momentum

Posted on January 14, 2026January 14, 2026 by Alex Call, CFP®

When most people think of retirement, they imagine the finish line . . . the end of a career, the end of responsibility, the end of a routine. But I see it differently. Retirement is not the end at all. It’s a new beginning. A third of your life may still be ahead of you. It’s not about retiring from something; it’s about retiring to something more meaningful.

When I sit down with clients and build out a 30-year retirement plan, the shift is tangible. They begin to realize that retirement isn’t a short phase. It’s potentially 30 years of purpose, contribution, and joy.

Seeing Retirement as a New Chapter

Education is the first step. I take time to walk clients through what retirement really looks like, both financially and emotionally. When they see the plan laid out, it clicks: this is a big part of life, not a postscript.

For many of our clients, retirement becomes a sacred opportunity to serve. Senior missions, humanitarian work, and community service become not only possible but deeply fulfilling. Others find themselves drawn to family, traveling frequently to spend quality time with children and grandchildren.

Some of the happiest retirees I know are the ones who come back to me two or three years after retiring and say, “I don’t know how I ever found time to work.” They’re busy, but they’re fulfilled. They’re giving back, they’re traveling, and they’re using their time intentionally.

Preparing for Retirement in the Final Stretch

So what should you focus on in the 5 to 10 years leading up to retirement? There are three key areas: emotional, structural, and financial.

Define What You’re Retiring To

It’s easy to say you’re retiring from a job. But what’s harder—and far more important—is deciding what you’re retiring to.

I encourage clients to think beyond the honeymoon phase of retirement. After the initial freedom and excitement wears off, what brings lasting purpose? Whether it’s serving others, spending more time with loved ones, or finally pursuing that long-postponed passion project, this clarity makes all the difference.

Unfortunately, there’s no script. Everyone has to write it themselves. But those who find a sense of mission tend to thrive.

Adjust Your Investment Strategy

Many people nearing retirement are still heavily invested in the stock market, sometimes 100% in equities. That’s probably fine in your 40s, but in your early 60s, it’s most likely time to shift to a more conservative strategy.

Our proprietary Perennial Income Model™ helps clients do just that. By segmenting retirement into six distinct five-year periods, the model provides predictable income early in retirement from conservative investments, while allowing later segments to grow. This structure protects you from having to sell in a down market and gives you peace of mind that your income is secure.

Know Your Retirement Budget

One of the most important, but often overlooked, steps is estimating your retirement spending. You won’t get it exactly right—no one does the first time—but having a solid estimate gives you a benchmark to measure against.

With a clear budget, we can determine if your current savings, pensions, and Social Security will support your lifestyle or if adjustments are needed.

Retirement With Purpose and a Plan

At the heart of our philosophy at Peterson Wealth is the belief that structure leads to freedom. With a clear financial plan, you can spend your time and money with confidence—supporting missions, donating to causes, traveling with family, or even helping a grandchild through college.

You’ve worked hard to get here. Now it’s time to live with intention. Retirement isn’t about slowing down. It’s about waking up with the freedom to do what matters most to you.

Whether you’re five years out or retiring this year, we’re ready to help you define and prepare for the next chapter—one filled with clarity, confidence, and purpose.

Ready to plan not just for retirement, but for a life well-lived? Schedule a retirement consultation with a Peterson Wealth Advisor today.