What High-Income Earners Need to Know About the New Roth Catch-Up Rules

Authored by Chris Vidler, CFP®, CIMA®

For many professionals age 50 and older, catch‑up contributions have long been an important way to save additional dollars during peak earning years. These contributions allow eligible workers to go beyond the standard annual retirement plan deferral limits, offering more room to build retirement savings late in their careers.

Beginning in 2026, a key rule change under the SECURE 2.0 Act will shift how higher‑income earners contribute these additional amounts. Under the new provision, individuals with more than $145,000 (indexed in future years for inflation) in prior‑year FICA wages will be required to make their catch‑up contributions on a Roth basis rather than pre‑tax.

This adjustment has raised understandable questions among executives and other high‑income earners who have traditionally valued the immediate tax deduction that pre‑tax catch‑up contributions provide. Yet as the rest of this article will explore, the change may offer meaningful long‑term advantages, particularly for households navigating rising income, large pre‑tax balances, and increasingly complex retirement decisions.

What’s Changing in 2026

Beginning in 2026, a significant change under the SECURE 2.0 Act will affect how higher‑income earners age 50 and older make catch‑up contributions to their employer retirement plans. Anyone with more than $145,000 in FICA wages from the prior calendar year must direct their catch‑up contributions into a Roth account rather than a pre‑tax account.

This shift does not eliminate catch‑up contributions; it simply changes the type of account in which these contributions must be made. For individuals who qualify, the catch‑up amount (currently an additional $7,500 above the standard contribution limit) remains available, but it will now be made using after‑tax dollars, with the potential for tax‑free growth and withdrawals later in retirement.

Although this rule was originally set to begin in 2024, the IRS granted a two‑year administrative transition period to give employers and payroll systems time to update their plans. As a result, pre‑tax catch‑up contributions remained available through 2025, but starting January 1, 2026, the Roth requirement becomes mandatory for those above the wage threshold.

Why Concentric Believes This Change May Help Higher Earners

While the shift to Roth catch‑up contributions may feel like the loss of an immediate tax deduction, we believe there are several long‑term advantages for higher‑income earners, particularly for those in their peak career years.

1. Greater Long‑Term Flexibility Through Tax‑Free Withdrawals
   
   Many executives and professionals enter retirement with higher taxable income, deferred compensation, and other income sources. Roth accounts offer tax‑free withdrawals in retirement, which may provide more options when coordinating distributions and managing taxable income.
   
   
2. Helping Reduce Future Tax Pressure from RMDs
   
   High‑income earners often accumulate large balances in traditional 401(k)s and IRAs over decades of saving. When Required Minimum Distributions (RMDs) begin, these balances can translate into sizable mandatory withdrawals.
   
   For example:
   A couple in their early 70s with $2.5 million saved across pre‑tax retirement accounts might face initial RMDs of roughly $100,000 per year—regardless of their actual spending needs[1]. These withdrawals stack on top of Social Security and investment income, potentially increasing their tax burden and their exposure to income‑based Medicare (IRMAA) surcharges.
   
   Shifting a portion of future savings into Roth accounts can help manage this pressure, because Roth 401(k) and Roth IRA balances do not have RMDs, offering more control over taxable income later in life.
   
   
3. Tax Diversification for an Uncertain Future
   
   Long‑term planning involves many unknowns such as changes in income, tax rates, retirement timing, or state residency. Unpredictable life events can alter retirement planning assumptions, underscoring the value of a mix of pre‑tax and Roth assets. Roth savings add flexibility as circumstances evolve.
   
   
4. A Valuable Opportunity for Those Who Earn Too Much for Roth IRAs
   
   A frequent misconception is that if your income is too high for Roth IRA contributions, you also cannot contribute to a Roth 401(k). This is not the case.
   
   

   Roth IRA income limits do not apply to Roth 401(k) contributions or Roth catch‑up contributions. That means high‑income earners, including those far above Roth IRA thresholds, can still build meaningful Roth savings inside employer plans.

5. Additional Roth Benefits for High‑Income Households
   

   Roth accounts may offer several long‑term planning advantages, including:

   • Tax‑free withdrawals that do not increase income used for Medicare IRMAA calculations or the 3.8% net investment income tax.
     
     
   • More flexibility for heirs, because Roth balances do not require annual taxable distributions under the 10‑year inheritance rule, allowing heirs to let the funds compound tax-free before the account is required to be liquidated at the 10-year mark.

Though this shift may cause a loss of a tax deduction in the year the contribution is made, the long‑term impact can be valuable. By building a mix of pre‑tax and Roth assets, many higher‑income earners may find they have more flexibility in managing taxable income, planning withdrawals, and navigating changing tax environments in their retirement years. In this sense, the new requirement may serve as a helpful opportunity to add tax diversification to a retirement strategy.

Planning Considerations for 2026 and Beyond

With the Roth catch‑up requirement now set for 2026, high‑income earners may want to review how their retirement savings approach fits into broader long‑term planning.

1. Consider How Roth Catch‑Ups Affect Your Long‑Term Tax Profile
   
   Beginning in 2026, all catch‑up contributions for individuals above the wage threshold will be made with after‑tax dollars. While this may increase current‑year taxable income, Roth withdrawals can be tax‑free in retirement, offering potential flexibility when managing future income.
   
   
2. Evaluate the Role of Roth Assets in Reducing Future RMD Pressure
   
   Substantial pre‑tax balances can lead to large RMDs later in life. Because Roth accounts do not have RMDs, shifting catch‑up dollars into a Roth can help manage future mandatory withdrawals and support long‑term flexibility.
   
   
3. Revisit Your Tax Diversification Strategy
   
   Tax laws, income needs, and even state residency can shift over a long retirement. A blend of pre‑tax, Roth, and taxable assets may provide more options as circumstances change.
   
   
4. Take Advantage of Roth Access Even If You Exceed Roth IRA Income Limits
   
   Roth IRA income limits do not apply to Roth 401(k) contributions. High‑income earners can still build Roth assets through employer plans—often at higher contribution levels than a Roth IRA would allow.
   
   
5. Coordinate Roth Catch‑Ups with the Rest of Your Retirement Plan
   
   As Roth balances grow, it may be useful to revisit how you plan to draw from different accounts, what your taxable income might look like in retirement, and whether your savings approach supports the flexibility you want later in life.

Conclusion

With the new Roth catch‑up rules already in place, many high‑income earners are now asking a natural question: “Should I still make catch‑up contributions?” The loss of a current‑year tax deduction may lead to hesitation, especially for those accustomed to lowering taxable income during peak earning years.

Yet as outlined, the long‑term considerations tell a different story. Moving catch‑up contributions into a Roth account allows you to steadily build assets that can experience tax-free market growth and be accessed tax‑free in retirement. For individuals who already hold substantial pre‑tax balances, this shift may help create a more balanced tax profile and more flexibility when coordinating income later in life.

So, while this adjustment may feel inconvenient today, continuing to make catch‑up contributions can still play an important role in a long‑term retirement strategy. The new rule simply shifts some tax‑diversification planning into your employer plan automatically—something that may ultimately support a more adaptable retirement.

If you’d like to explore how this change fits into your long‑term planning, we’re here to help:
www.concentricwealthpartners.com/contact-us.