You’ve worked hard to build your career, and your income reflects that success. For years, you’ve maxed out your retirement contributions, taking full advantage of catch-up provisions once you hit 50. The tax deduction each year provides welcome relief from your growing tax bill while building the nest egg you’ll need in retirement.
Starting January 1, 2026, the rules change in a way that will affect how you save. The SECURE 2.0 Act introduces a requirement that could eliminate the upfront tax benefit you’ve relied on for catch-up contributions. If your earnings exceeded $150,000 in 2025, any catch-up contributions you make to your employer-sponsored retirement plan in 2026 must go into a Roth account. This shift from pre-tax to after-tax contributions carries implications for your take-home pay, your tax strategy, and your long-term retirement planning.
Understanding the New Roth Catch-Up Requirement
The SECURE 2.0 Act fundamentally changes how certain high earners can make catch-up contributions to workplace retirement plans. Beginning in 2026, employees aged 50 or older who had FICA wages exceeding $150,000 from their current employer in the previous calendar year must designate all catch-up contributions as Roth contributions.
This requirement applies to 401(k), 403(b), and governmental 457(b) plans. Traditional IRAs and Roth IRAs remain unaffected by this rule, meaning you can still make catch-up contributions to IRAs on either a pre-tax or Roth basis regardless of your income level. The wage threshold considers only compensation from the employer sponsoring your current retirement plan, so earnings from previous employers or side businesses don’t factor into the calculation.
The IRS issued final regulations in September 2025 implementing these provisions. While the regulations technically take effect in 2027, the statutory requirement itself begins January 1, 2026. The IRS will apply a “reasonable, good faith” compliance standard throughout 2026, giving employers and employees time to adjust systems and processes.
How the Numbers Break Down for 2026
Understanding the specific contribution limits helps clarify the practical impact of this change. For 2026, the base retirement plan contribution limit rises to $24,500. This standard limit applies to everyone under age 50, and workers 50 and older can still make these regular contributions on a pre-tax basis regardless of income.
The catch-up contribution for those aged 50 and older increases to $8,000 for 2026. For high earners subject to the Roth requirement, this $8,000 must be contributed on an after-tax basis. That means your total potential contribution reaches $32,500, but only the first $24,500 can reduce your current taxable income.
Workers between ages 60 and 63 have access to an even larger “super catch-up” contribution. This provision allows an additional $11,250 instead of the standard $8,000 catch-up amount. High earners in this age bracket face the same Roth requirement, meaning this super catch-up must also be made with after-tax dollars.
The Tax Impact on Your Take-Home Pay
The shift from pre-tax to Roth catch-up contributions creates an immediate change in your paycheck and your annual tax bill. When you make pre-tax contributions, those dollars reduce your taxable income in the year you contribute. Roth contributions work differently: you pay taxes on that income now, but qualified withdrawals in retirement come out tax-free.
For someone making the full $8,000 catch-up contribution in 2026 who falls into the 24% tax bracket, the Roth requirement means paying approximately $1,920 more in federal income tax that year compared to making pre-tax catch-up contributions. State income taxes would add to this amount in most states. Your take-home pay decreases because the contribution no longer shields that $8,000 from current taxation.
This change affects more than just your current year’s taxes. A higher adjusted gross income could impact other tax provisions. The loss of the catch-up contribution deduction might push you above thresholds for certain deductions or credits, or affect how much of your Social Security benefits becomes taxable. The ripple effects extend beyond the direct tax on the contribution itself.
When Your Employer Plan Lacks Roth Features
A critical consideration involves whether your employer’s retirement plan currently offers Roth contribution options. Plans aren’t required to include Roth features, and if your plan doesn’t offer Roth contributions, you cannot make catch-up contributions at all once this rule takes effect.
This creates a situation where high earners working for companies without Roth plan features lose access to catch-up contributions entirely unless their employer updates the plan. Employees earning less than the $150,000 threshold remain unaffected and can continue making pre-tax catch-up contributions. The disparity means some workers at the same company will have different catch-up contribution options based solely on their compensation level.
Employers need to coordinate with plan administrators and payroll providers to add Roth features if they want to preserve catch-up contribution access for higher-earning employees. Many companies are working through these updates now, but the transition requires document amendments, system configurations, and employee communications. If your plan currently lacks Roth options, you should inquire about the timeline for adding this feature.
Strategies to Consider Before Year-End
The shift to mandatory Roth catch-ups demands strategic planning, particularly as we approach the 2026 implementation date. Review your 2025 income carefully. The requirement applies based on prior year wages, so your 2025 FICA wages from your current employer determine whether you’re subject to the Roth mandate in 2026. Check Box 3 on your 2025 W-2 when you receive it to confirm your status.
For those who will definitely exceed the threshold, evaluate the tax trade-offs carefully. Roth contributions eliminate the current year deduction but provide tax-free growth and withdrawals in retirement. This structure works well if you expect to be in a similar or higher tax bracket during retirement. The analysis becomes more complex if you anticipate lower retirement income, as pre-tax contributions would have provided a deduction at your current higher rate, while withdrawals may be taxed at a lower future rate.
New Employees and the Prior-Year Wage Rule
The prior-year wage calculation creates interesting scenarios for people who change employers or start new jobs. New employees are never affected in their first year of employment because they have no prior-year wages from their current employer. Someone starting a new job in 2026 with a high salary won’t be subject to the Roth requirement until 2027.
The rule can create unexpected results in the second year of employment as well. Because the $150,000 threshold isn’t prorated, someone who starts mid-year might avoid the requirement even in their second year. For example, if you begin a job in July 2026 earning $250,000 annually, your actual 2026 wages from that employer would be approximately $125,000. This amount falls below the threshold, exempting you from the Roth requirement in 2027.
Employers who hire mid-career professionals need to communicate these nuances clearly. The determination depends entirely on actual wages paid by the current employer in the previous calendar year, which creates variations based on start dates and pay schedules.
The Long-Term Perspective on Roth Contributions
While losing the upfront tax deduction feels painful, Roth contributions offer distinct long-term advantages worth considering. Money contributed to a Roth account grows tax-free, and qualified withdrawals in retirement, both contributions and earnings, come out without triggering any income tax.
This tax-free withdrawal feature provides planning flexibility in retirement. You can manage your taxable income more precisely by drawing from a mix of pre-tax and Roth accounts. Need to stay below a certain income threshold to minimize Medicare premiums or avoid taxation of Social Security benefits? Roth withdrawals don’t count toward those income calculations.
Required minimum distributions present another consideration. Traditional 401(k) accounts require you to start taking distributions at age 73(or 75 if you were born after 1959) under current law, whether you need the money or not. Roth 401(k) accounts were subject to RMDs until the SECURE 2.0 Act eliminated this requirement for distributions starting in 2024. The ability to leave Roth funds untouched creates options for extending tax-free growth and leaving larger after-tax inheritances.
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The mandatory Roth catch-up requirement represents a significant shift in retirement planning for high earners approaching retirement. What once provided valuable tax deductions now requires paying taxes upfront on those contributions. The change affects your current cash flow, your annual tax bill, and the composition of your retirement assets. Successfully adapting requires understanding the specific rules, evaluating your current and future tax situations, and coordinating with your employer to ensure your plan offers the necessary Roth features.
At Brogan Financial, we help high-earning clients make strategic decisions about retirement contributions in light of evolving tax regulations. We’ll analyze whether the loss of the catch-up deduction justifies continuing these contributions, evaluate how the change affects your overall tax picture, and identify opportunities to optimize your retirement savings strategy. Our team can model the long-term implications of Roth versus pre-tax contributions based on your specific income trajectory and retirement goals.
These SECURE 2.0 provisions took effect on January 1, 2026, making now the time to assess your situation and adjust your strategy. Schedule a consultation with Brogan Financial to review your 2026 retirement contribution plan, ensure you’re maximizing available tax advantages, and develop a comprehensive approach to building retirement security despite these new limitations.
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