2026 Retirement Planning Changes: What North Carolina Professionals and Business Owners Need to Know
Three significant federal law changes are reshaping retirement planning in 2026, and if you're a professional or business owner in North Carolina making over $150,000, these changes affect how you save for retirement - and how you plan your estate. The SECURE 2.0 Act and One Big Beautiful Bill Act provisions taking effect this year create both opportunities and requirements you need to understand.
Let me walk you through what changed, why it matters for North Carolina professionals and business owners, and what you should review in your estate planning to make sure these retirement account changes work in your favor.
Three Major Federal Retirement Changes for 2026
The federal government made substantial changes to retirement savings rules that took effect January 1, 2026. These aren't minor technical adjustments - they fundamentally change how high earners contribute to retirement plans, how taxpayers deduct state and local taxes, and what deductions are available for seniors.
Change #1: Mandatory Roth Catch-Up Contributions for High Earners
Starting in 2026, professionals and business owners who earned $150,000 or more in FICA income last year and are over age 50 must make their 401(k) catch-up contributions to a Roth option rather than traditional tax-deferred contributions. This is a requirement, not a choice.
The baseline 401(k) contribution limit increased to $24,500 for 2026. Workers over 50 can contribute an additional $8,000 in catch-up contributions for a total of $32,500. Workers between ages 60 and 63 can make "super-catch-up" contributions of $11,250 on top of the $24,500 baseline, for a total of $35,750.
The Roth requirement applies only to the catch-up portion for high earners. You can still make your baseline $24,500 contribution to traditional tax-deferred 401(k), but the catch-up amount must go to Roth if you earned over $150,000 last year.
Change #2: Increased SALT Deduction Cap
The state and local tax deduction cap increased from $10,000 to $40,000 for tax years 2025 through 2029. This change particularly affects high-income taxpayers in states with significant state and local taxes. The higher deduction phases out for taxpayers with modified adjusted gross income over $500,000 and disappears entirely for those with MAGI over $600,000.
Change #3: New Senior Deduction
Through 2028, taxpayers age 65 and older can claim an additional $6,000 deduction ($12,000 for married couples filing jointly if both are 65 or older). This deduction is available whether you itemize or take the standard deduction. For single filers over 65 taking the standard deduction, total deductions would be $24,150 in 2026. For married couples over 65 filing jointly, total standard deductions would be $47,500.
However, income limits apply. The senior deduction phases out for single filers with MAGI over $75,000 and married couples with MAGI over $150,000, and disappears completely for singles with MAGI over $175,000 and married couples with MAGI of $250,000 or more.
According to WRAL, these changes represent some of the most significant shifts in retirement planning rules in recent years, affecting millions of Americans including professionals and business owners throughout North Carolina.
Why This Matters for North Carolina Professionals and Business Owners
If you're a physician in Raleigh, an attorney in Cary, a business owner in Durham, or any other professional throughout the Triangle area earning over $150,000, these changes directly affect both your retirement savings strategy and your estate planning.
The mandatory Roth catch-up requirement creates a fundamental shift in how high earners build retirement savings. Roth contributions go in after-tax, which means you pay taxes now rather than in retirement. For professionals and business owners in their peak earning years, that can mean a significant tax bill on money you're trying to save.
Here's what makes this complicated: the decision between traditional and Roth contributions has always been about tax planning - pay taxes now or pay taxes later. But starting in 2026, high earners don't get to make that choice for catch-up contributions. The law requires Roth for the catch-up portion if you earned over $150,000 last year.
Let's say you're a 55-year-old business owner in North Carolina earning $200,000 annually. You want to maximize your 401(k) contributions. You can contribute $24,500 to traditional tax-deferred 401(k), which reduces your current taxable income. But your $8,000 catch-up contribution must go to Roth, which means you're paying taxes on that $8,000 now at your current marginal rate.
This matters for estate planning because how you structure retirement contributions affects what your beneficiaries inherit. Traditional 401(k) accounts pass to beneficiaries as taxable income. Roth accounts pass tax-free. Under current law, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years, paying taxes on traditional accounts as they withdraw.
The SALT deduction increase matters for North Carolina residents even though North Carolina has relatively moderate state taxes compared to high-tax states. If you own property in multiple states, have significant real estate holdings, or pay substantial local taxes, the higher SALT cap could provide meaningful tax savings - but only if your income stays under the phase-out thresholds.
The senior deduction creates planning opportunities for early retirees who have control over their taxable income. If you're 65 or older and not yet taking Social Security or required minimum distributions, you might be able to structure income to maximize this deduction. But for higher-income professionals still working past 65, income limits may eliminate this benefit entirely.
Estate Planning Implications of 2026 Retirement Changes
Your estate plan needs to account for how these retirement contribution changes affect what you're leaving to your beneficiaries. Retirement accounts are often the largest asset people own, and how those accounts are taxed when inherited can significantly impact what your family actually receives.
The shift toward Roth contributions - whether voluntary or mandatory under the new high-earner rules - changes the tax character of inherited retirement accounts. When you leave a traditional 401(k) or IRA to your children, they inherit a tax liability. Every dollar they withdraw gets added to their taxable income. When you leave a Roth account, they inherit tax-free money. They still have to withdraw it within 10 years under current rules, but those withdrawals don't create additional tax liability.
For North Carolina professionals and business owners, this creates an estate planning question: Should you accelerate the mandatory Roth catch-up strategy by making additional Roth conversions? Converting traditional IRA balances to Roth generates a tax bill now, but creates tax-free inheritance for your beneficiaries later.
Your beneficiary designations on retirement accounts need regular review regardless of these changes. Retirement accounts pass outside your will through beneficiary designations you filed with the account custodian. If those designations are outdated, your carefully crafted estate plan might not accomplish what you intend.
Many people name their spouse as primary beneficiary and their children as contingent beneficiaries. That's often appropriate, but it's not always optimal depending on your family situation, the size of your retirement accounts, and your overall estate planning goals. Some situations call for naming trusts as beneficiaries, particularly if you have minor children, beneficiaries with special needs, or concerns about beneficiaries' financial management abilities.
North Carolina law governs how retirement accounts are treated in estate administration when they do pass through probate - typically because beneficiaries weren't properly designated or the estate was named as beneficiary. Understanding the interaction between federal retirement account rules and North Carolina probate procedures helps ensure your accounts pass efficiently to intended beneficiaries.
Estate tax considerations also shift with these changes. While North Carolina doesn't have a state estate tax, federal estate tax applies to estates exceeding $13.99 million in 2026. Large retirement account balances contribute to your taxable estate. The tax character of those accounts - traditional versus Roth - doesn't change whether they're included in your estate, but it does affect the net value your beneficiaries receive after income taxes.
What Business Owners Need to Know About 401(k) Plan Administration
If you're a North Carolina business owner who sponsors a 401(k) plan for your employees, you need to understand how the mandatory Roth catch-up requirement affects your plan administration. Not all 401(k) plans currently include a Roth option. If your plan doesn't have one and you have employees over 50 earning over $150,000, you need to add a Roth option to allow those employees to make their required catch-up contributions.
Adding a Roth option to an existing 401(k) plan requires amending your plan document. Your plan administrator or third-party administrator can handle the technical aspects, but you need to initiate the process. Failing to provide the required Roth option could create compliance issues for your plan.
Business owners often participate in their own company's 401(k) plan. If you're over 50, earn over $150,000, and want to maximize retirement contributions, you need to coordinate with your plan administrator to ensure your catch-up contributions go to the Roth option. If your plan doesn't have a Roth option yet, consider making IRA contributions instead until your plan is amended. The 2026 IRA contribution limit is $7,500, with an additional $1,100 catch-up for those over 50, allowing total IRA contributions of $8,600.
For business owners considering business succession planning, retirement planning intersects with succession decisions. How you structure retirement savings affects both your personal financial security and your business's ability to attract and retain key employees. Comprehensive business planning addresses both retirement adequacy and business continuity.
Business owners also need to consider how the SALT deduction changes affect their personal tax planning. If you own commercial real estate, pay significant property taxes, or have other substantial state and local tax obligations, the increased SALT cap could provide meaningful deductions - but strategic income planning might be necessary to stay under the phase-out thresholds.
What North Carolina Professionals Should Do Before Year-End 2026
You have the entire year to adjust to these changes, but several actions benefit from early planning rather than December scrambling.
Review your retirement plan options. If you're a high earner affected by the mandatory Roth catch-up rule, verify that your employer's 401(k) plan includes a Roth option. If it doesn't, ask your HR department or plan administrator about adding one. If your plan won't have a Roth option available, plan to make IRA contributions to supplement your baseline 401(k) contributions.
Evaluate your beneficiary designations. Pull out your retirement account statements and check who you've named as beneficiaries. Are those designations current? Do they reflect your family situation as it exists today? If you've had children, gotten married or divorced, or experienced other major life changes since you set up your accounts, your beneficiaries might need updating.
Review your estate plan in light of retirement account changes. If retirement accounts represent a significant portion of your estate, discuss with your estate planning attorney how the shift toward Roth contributions affects your overall estate plan. The tax character of inherited retirement accounts matters to your beneficiaries, and your estate planning should account for those differences.
Consider whether Roth conversions make sense for your situation. The mandatory Roth catch-up requirement affects only new contributions. You might have substantial traditional IRA balances that would benefit from conversion to Roth. Converting generates a tax bill now but creates tax-free inheritance later. Whether that trade-off makes sense depends on your current tax bracket, expected future tax brackets, estate size, and beneficiary situations.
Coordinate retirement planning with business planning if you're a business owner. Your 401(k) plan needs to comply with new requirements. Your personal retirement savings need to coordinate with business succession plans. Your overall wealth management should integrate retirement accounts, business value, real estate, and other assets into a coherent strategy.
Don't leave these decisions up to chance. Retirement accounts are complex. Estate planning is complex. The interaction between them is even more complex, particularly with new federal requirements taking effect this year. Professionals and business owners throughout North Carolina face these same challenges - but the solutions depend on individual circumstances.
Contact us for a consultation to review how 2026 retirement changes affect your estate planning and retirement strategy. We help professionals and business owners throughout Raleigh, Cary, Apex, Durham, Chapel Hill, and the surrounding Triangle area with comprehensive planning that coordinates retirement savings, estate planning, and business succession.
Frequently Asked Questions About 2026 Retirement Changes and Estate Planning
Do the mandatory Roth catch-up rules apply if I'm self-employed?
Yes, if you have a solo 401(k) or other self-employed retirement plan and earned over $150,000 in self-employment income last year. The requirement applies to all 401(k)-type plans, not just employer-sponsored plans. If your solo 401(k) doesn't have a Roth option, you'll need to amend your plan or make catch-up contributions through an IRA instead, where you can contribute up to $8,600 total if you're over 50.
How do Roth vs. traditional retirement accounts affect my estate plan?
Traditional retirement accounts pass to beneficiaries as taxable income - they pay taxes as they withdraw. Roth accounts pass tax-free. Under current federal law, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years. With traditional accounts, those withdrawals add to their taxable income each year. With Roth accounts, withdrawals are tax-free. This difference can significantly affect the net inheritance your beneficiaries receive.
Should I name a trust as beneficiary of my retirement accounts?
It depends on your situation. Trusts as retirement account beneficiaries make sense when you have minor children who can't manage money yet, beneficiaries with special needs who receive government benefits, or concerns about beneficiaries' financial judgment. However, trusts as beneficiaries create additional complexity and potentially less favorable tax treatment. This decision should be made in consultation with an estate planning attorney who understands both North Carolina trust law and federal retirement account rules.
What happens if my 401(k) plan doesn't offer a Roth option?
If you're subject to the mandatory Roth catch-up requirement but your plan doesn't have a Roth option, you can't make catch-up contributions to that plan. Instead, maximize your baseline $24,500 contribution to traditional 401(k), then contribute to a Roth IRA or traditional IRA separately. The IRA contribution limit for 2026 is $8,600 if you're over 50. This requires coordination between your workplace plan and personal IRA contributions to maximize retirement savings.
How often should I review my retirement account beneficiary designations?
Review beneficiary designations every three to five years, and immediately after major life changes like marriage, divorce, birth of children, or death of a named beneficiary. Beneficiary designations override your will, so outdated designations can cause your retirement accounts to pass to unintended recipients. In North Carolina, divorce automatically revokes beneficiary designations naming a former spouse in some situations, but it's better to update designations proactively rather than rely on default legal rules.
Legal Disclaimer: This article provides general information about federal retirement law changes and estate planning considerations in North Carolina and should not be considered legal advice. Every situation is different. For advice about your specific circumstances, contact a licensed North Carolina attorney.
About This Article: This content is based on Associated Press reporting about 2026 retirement planning changes from SECURE 2.0 and the One Big Beautiful Bill Act. We provide this information as an educational resource about estate planning and retirement planning law in North Carolina. For questions about how these changes affect your estate plan and retirement strategy, contact The Walls Law Group at 919-647-9599.
