New Rules, Big Opportunities
If you’re 50 or older and eligible for catch-up contributions, the new year brings an important change under SECURE 2.0. Catch-up contributions to your 401(k), 403(b), or similar retirement plan accounts may now need to go into a Roth account — here’s what that means and what steps to take early in 2026.
What’s Changing
Starting in 2026, SECURE 2.0 Section 603 introduces changes to catch-up contributions:
- High earners (wages >$150,000 in 2025) must make their catch-up contributions into a Roth account.
- All catch-up eligible employees now have the option to contribute to Roth accounts if their plan allows, paying taxes now for the benefit of tax-free growth and withdrawals in retirement.
Previously, catch-ups were generally pre-tax, reducing your taxable income in the current year. Now, Roth contributions are increasingly being encouraged or required, depending on income and plan design.
Who Is Impacted
- Employees 50 or older (catch-up eligible)
- High earners with prior-year wages exceeding the threshold
- Other employees who want to take advantage of Roth contributions for tax-free growth
Even if you’re not required to use Roth, it can be a strategic tool to balance taxes now versus retirement withdrawals.
Why Roth Catch-Ups Matter
1. Tax Timing Changes: Roth contributions are after-tax, so your take-home pay may be lower.
2. Tax-Free Growth: The money grows tax-free, and qualified withdrawals in retirement are tax-free.
3. Strategic Flexibility: Roth catch-ups give you more tools to manage taxes both now and in retirement.
Action Steps for the New Year
1. Check Your Eligibility: Confirm that you’re 50+ and catch-up eligible. High earners should review 2025 wages against the threshold.
2. Review Payroll Elections Early: Work with HR or your plan administrator to set up Roth catch-up contributions correctly.
3. Consult a Financial Advisor: Decide whether Roth or traditional catch-up contributions best fit your retirement and tax strategy.
Next Steps
- Consult a financial advisor before making changes to avoid errors.
- Review your plan options early in 2026 to maximize tax-advantaged growth.
- Click here to talk to a Focus Team advisor to see how Roth catch-ups fit into your broader retirement strategy.
Disclaimer
Farther and the Focus Team are not tax professionals, and this article does not constitute tax advice. Please consult a qualified tax or financial advisor before making changes to your retirement contributions.
Sources
1. IRS – Final Regulations on Roth Catch-Up Contributions
2. Ascensus – Navigating SECURE 2.0: Mandatory Roth Catch-Up Contributions
3. NRS for U – SECURE Act 2.0 Provision 603
4. IRS – 401(k) Contribution Limits for 2026
