New Roth Catch-Up Contribution Requirement Under SECURE Act 2.0
Learn how retirement plan updates may affect your long-term savings and planning strategies.
November 2025
The SECURE 2.0 Act of 2022 introduced a major change for certain older, high‐earning retirement savers. Beginning January 1, 2026, participants age 50 and over who earn more than $145,000 in FICA wages (Social Security wages) in the prior year must make all catch-up contributions on an after-tax (Roth) basis. Catch-up contributions are extra elective deferrals available to employees age 50+ beyond the regular contribution limit. Under the new rule, high earners lose the option to make those extra contributions on a pre-tax basis. Instead, any catch-up dollars must go into the plan’s Roth account, meaning taxes are paid up front. This applies to catch-ups under 401(k), 401(a), 403(b) and 457(b) plans (essentially, most workplace retirement plans).
How the New Roth Catch-Up Rule Works
Starting with the 2026 plan year, any employee-age-50+ whose prior-year W-2 “Box 3” Social Security wages exceed $145,000 will be subject to the Roth-only catch-up rule. The $145,000 threshold is indexed for inflation each year.
For example, if you earned $150,000 in 2025 W-2 wages, then for 2026 any catch-up contributions you elect must be to the Roth account. By contrast, savers who earned $145,000 or less can continue to make catch-ups on a pre-tax or Roth basis as before. Only wages from your current employer (the plan sponsor) count toward the $145,000 test. (If your plan covers related employers using a common paymaster or group, those wages may be aggregated, but generally you look at Box 3 of your W-2 from that employer to see if you exceed the limit.)
During the transition phase, plans have been allowed to continue accepting pre-tax catch-ups through 2025 even if an employee is above the threshold. But for the 2026 tax year and beyond, those catch-up contributions by high earners will no longer reduce current taxable income; they must go into the Roth account (after tax).
Why Roth vs. Pre-Tax Matters
A pre-tax contribution reduces your taxable income in the year you make it, and taxes are deferred until you withdraw the money in retirement. In contrast, a Roth contribution is made with after-tax dollars. That means you pay income tax now on the money, but qualified distributions in retirement are tax-free, including all the earnings on the contributions. In practical terms, the SECURE 2.0 change forces eligible catch-up contributions to be taxed immediately rather than deferred.
Impact on Retirement Savings
This change means high‐earning participants will no longer get an immediate tax deduction for their catch-up deferrals. Instead, those contributions will grow tax-free in the Roth account. In effect:
- Tax now vs. later: You pay income tax on the catch-up contribution in the year it’s made. Later withdrawals (contributions plus earnings) are tax-free, provided you meet the Roth withdrawal rules (age 59½ and 5-year holding period).
- No change to regular limits: The standard contribution limits ($23,500 for 2025, plus catch-up $7,500) remain the same. Only the tax treatment of the catch-up portion changes. Regular contributions (up to the annual limit) can still be pre-tax if you qualify.
- Potential benefits: Paying tax now may be worthwhile if you expect to be in a higher tax bracket later, or if you want the benefit of tax-free income in retirement. Roth assets also avoid RMDs (required minimum distributions) after retirement.
- Higher-earning portfolios: For savvy planners, the forced Roth catch-up can be seen as a nudge toward tax diversification. However, it also means less tax shelter for contributions now. For those in very high brackets, this could slightly raise current tax bills.
Action Steps and Looking Ahead
High‐earning savers should take proactive steps now to prepare:
- Check your prior-year wages: Look at Box 3 of your 2025 Form W-2 to see if your Social Security wages exceed $145,000. If so, the new rule will apply to you in 2026.
- Review your plan’s Roth option: Does your 401(k)/403(b) offer Roth catch-up contributions? If not, you may have to make a decision. Plans are not legally required to add a Roth feature, but if they don’t, then in 2026 you cannot make any catch-up contributions at all if you’re above the threshold. Speak with your employer or plan administrator about how your plan will handle this rule.
- Plan for taxes: Because catch-ups will be taxed immediately, make sure you have withholding or estimated tax planning in place. You might want to withhold a bit more during the year to cover the tax on the Roth catch-up.
- Maximize other tax-advantaged accounts: Ensure you’re already hitting the regular 401(k) limit. Also consider funding other accounts, such as Health Savings Accounts (if eligible), 529 plans, or after-tax contributions (if your plan allows and supports in-plan conversions) to shelter more savings.
- Look at IRAs and conversions: If your plan won’t allow Roth catch-ups or you have more to save, consider a backdoor Roth IRA strategy. For 2024–25, the IRA contribution limit is $8,000 ($7,000 + $1,000 catch-up) for age 50+. If your income exceeds the Roth IRA limit, you could make nondeductible Traditional IRA contributions and then convert them to a Roth IRA (the so-called Roth conversion maneuver). This is an alternative way to build Roth assets if your 401(k) won’t allow it.
- Tax diversification: Use this as an opportunity to rebalance your tax buckets. If you already have significant pre-tax savings, adding Roth funds can diversify future tax risk. Conversely, if paying tax now is a concern, double-check any opportunities for deductions or credits in your year.
- Consult your advisor: Finally, discuss with your financial or tax advisor. Personal circumstances (filing status, state taxes, planned retirement income) will influence whether paying tax today on catch-ups makes sense for you. We can help model the tax impact and adjust your retirement contribution strategy accordingly. Contact our team today to discuss options.