The 2026 Roth Mandate for Catch-Up Contributions: A Subtle but Significant Shift in Retirement Savings

The leaves on trees are starting to change, and Christmas décor is already in stores. This serves as another reminder that 2026 will be here soon. With the new year comes a new, and under-the-radar, tax regulation that could have a meaningful impact on some paychecks.

Beginning in 2026, a new provision within the SECURE 2.0 Act will mandate a significant change for the higher-earning employees over the age of 50: catch-up contributions (including the “super catch up” contribution for those age 60-63) must be made on a Roth (after-tax) basis. Though this shift has not been well publicized since the law was passed in 2024 but delayed implementation until 2026, it could carry substantial implications for both near-term tax strategy and long-term wealth planning. To net it out in dollar terms, a taxpayer in the 37% tax bracket fully maximizing the “super catch up” contribution of $11,250 (2025 amount) in 2026 will see their federal tax liability increase over $4,100!

For those with retirement on the near-term horizon, it’s likely the decades-long inertia of contributing to a 401(k) on a pre-tax basis was the default option. The appeal is straightforward: someone aged 50 or older can contribute the annual maximum, plus “catch up” dollars, to employer-sponsored retirement plan before tax, which reduces current income tax liabilities in what is typically the highest marginal brackets of the earning years. The more recent availability of mixing in Roth (after-tax) contributions, coupled with the benefit of a thorough multi-year tax strategy, can allow some mix of pre-tax and after-tax contributions to make sense. This determination depends on individual tax rates and the mix of pre-tax and after-tax investment accounts and retirement income projections. Until now, the decision on this “mix” was up to the employee and their wealth & tax advisor. But this change is not simply a logistical adjustment, it is a reorientation of how tax liability is distributed over what could be a 30+ year retirement. For many, it may feel like a legislative intrusion into what was previously a personal, strategic decision. As with most changes in the tax code, the true impact depends on a broader financial plan—and each person’s ability to respond with foresight rather than reflex.

Effective January 1, 2026, employees who are 50 years or older and earned $145,000 or more in wages from their current employer in the preceding year will be required to direct any catch-up contributions into a Roth 401(k), Roth 403(b), or equivalent after-tax retirement account. The $145,000 wage threshold will be indexed for inflation, meaning it will likely rise modestly in future years and could be higher, even for tax year 2026. Catch-up limits are not going away. For 2025, individuals age 50 or older may contribute an additional $7,500 to their retirement plan, beyond the standard limit ($23,500 for 2025). That extra room will persist, but high earners will no longer receive the immediate tax deduction that traditionally accompanied these contributions in 2026.

Importantly, if an employer does not offer a Roth option within its retirement plan, affected employees will be prohibited from making catch-up contributions at all—an unambiguous nudge from Congress to employers to modernize plan offerings.

As with many aspects of the SECURE 2.0 Act, this provision is less about optimizing retirement outcomes and more about revenue recognition for federal budgeting purposes.

By mandating the shift of catch-up contributions from pre-tax to Roth, the federal government accelerates its tax collections. Roth contributions are taxed in the year they are made, providing a near-term boost to the Treasury, an attractive feature for legislators working under pay-as-you-go rules. However, that does not mean it should be dismissed as punitive or unhelpful. In fact, with proper planning, this shift may present underappreciated opportunities.

While Roth accounts carry meaningful benefits (which we will explore shortly), this mandatory change may present challenges for individuals who thoughtfully integrate catch-up contributions into their broader tax strategy.

1. Loss of Immediate Tax Relief: As previously mentioned, for high earners in the 32%, 35%, or 37% marginal brackets, the catch-up contribution offered a meaningful current-year deduction. Mandating that the $7,500 catch-up be contributed into a Roth account results in a direct increase in taxable income. In addition to the higher tax liability, this loss of flexibility also incurs collateral tax damage for some individuals over income thresholds that could trigger Medicare IRMAA surcharges (if close to 65), the net investment income tax (3.8% on investment income for high earners), and phaseouts of other deductions or credits.
2. Coordination Complexity: For many people engaged with a tax-sensitive wealth planner who engages in sophisticated Roth conversion planning, filling up low tax brackets post-retirement can be very efficient. Forcing Roth contributions while still in peak earning years introduces complexity—and potentially less-than-optimal timing—for when tax is paid on retirement savings.
3. Plan Limitations and Employer Readiness: Despite Roth options being commonplace among larger retirement plans, not all employers, especially smaller firms, have implemented them. Absent that option, high-wage employees lose access to catch-up contributions altogether unless their plan is updated before the end of 2026.

Despite the drawbacks, a Roth catch-up contribution can offer meaningful long-term advantages—especially when viewed through the lens of tax diversification, legacy planning, and retirement income flexibility.

1. Tax Diversification in Retirement: Many affluent retirees face a common challenge: a high mix of tax-deferred assets in the portfolio. Required Minimum Distributions (RMDs), beginning at age 73 or later, can create significant taxable income in retirement, which could lead to higher capital gains tax, more social security taxation, higher Medicare premiums, and other impacts. Building a Roth “bucket” creates valuable optionality. Distributions from Roth accounts are tax-free, not subject to RMDs, and can be strategically timed to manage taxable income, which is particularly useful in managing these ancillary impacts.
2. A Hedge Against Higher Future Tax Rates: Given the high and growing federal deficit, many believe tax rates are more likely to rise than fall over the coming decades. In this context, being “forced” to pay tax now at today’s rates on catch-up contributions, may compound tax-free for 20+ years and could ultimately result in a lower effective tax burden over the long term.
3. Enhanced Legacy Benefits: Under the SECURE Act, most non-spouse beneficiaries must fully deplete inherited retirement accounts within 10 years, which creates significant tax compression for heirs who are in their peak earning years. Roth assets are not exempt from this 10-year rule, but since distributions are not taxable, Roth accounts are inherently more tax-efficient assets to leave to the next generation.

The implications of this rule warrant proactive planning, especially for those over 50 with income approaching or over the $145,000 threshold.

1. Check in with your employer’s plan: Ensure Roth 401(k) contributions are available. If not, begin discussions now with HR or plan sponsors.
2. Model future tax scenarios and coordinate with Roth Conversions: A higher Roth allocation now could reduce your long-term tax burden—particularly if you anticipate higher rates and larger taxable RMDs. This change means the strategy of future Roth conversions in low-income, post-retirement years should be reassessed and refreshed.
3. Manage the tax liability: If close to $145,000 in earnings, consider offsetting strategies -- such as charitable giving, Donor Advised Funds, or capital loss harvesting -- to mitigate the increased taxable income in the catch-up years.

We often hear concerns from clients about the potential for US government to change the rules on availability of Roth accounts given the long-term tax advantages, but this ruling implies that Roth accounts aren’t going anywhere. Why? With massive budget deficits and historically high debt, Uncle Sam is more than happy to take in tax revenue up front (by reducing tax deferral availability) to pay the country’s bills. While this could diminish tax revenue at the margin in later decades, some short-sighted lawmakers are more than happy to kick that can down the road to collect higher tax revenue in the near term.

In isolation, this Roth catch-up requirement may seem punitive and a nuisance, a legislative footnote that complicates otherwise straightforward retirement savings. However, when integrated thoughtfully into a long-range financial plan, it becomes a powerful opportunity to rebalance tax exposure, improve flexibility, and strengthen wealth transfer outcomes.

As with most shifts in tax policy, the most prudent response is not to resist but to adapt. For affluent individuals entering the final phase of accumulation, this change should serve as a prompt: revisit your assumptions, revise your projections, and ensure your strategy is calibrated for the decades ahead.