If you’re 50 or older and saving for retirement, a significant change is on the horizon. The IRS has issued final regulations implementing the SECURE 2.0 Act, requiring certain catch-up contributions to be made as Roth (after-tax) for high-income workers.
This marks one of the most impactful shifts in retirement plan rules in recent years.
While catch-up contributions have long been a way for older savers to boost retirement accounts, the new regulations bring changes in income thresholds, timing, and contribution options.
What Are Catch-Up Contributions?
Catch-up contributions are extra amounts individuals age 50 and older can contribute to their retirement plans—such as 401(k), 403(b), or governmental 457(b)—beyond standard annual limits.
Traditionally, these contributions could be made on a pre-tax basis (reducing taxable income now) or as Roth contributions, depending on the plan’s options.
With the final regulations, high earners will soon be required to make those catch-ups as Roth contributions only, meaning taxes are paid upfront and withdrawals in retirement are generally tax-free.
Key Details of the Final Regulations
Here are the critical elements of the new rules:
| Provision | Details | Who’s Affected |
|---|---|---|
| Income Threshold | Employees aged 50+ with FICA wages over $145,000 in the prior year must make catch-up contributions as Roth. | High-income earners age 50+ |
| Effective Date | Mandatory Roth catch-ups apply to taxable years beginning after Dec. 31, 2026 (most plans starting in 2027). | All qualifying participants |
| Super Catch-Up | Ages 60–63 can contribute 150% of the normal catch-up limit (e.g., $11,250 in 2025). | Older workers nearing retirement |
| SIMPLE Plans | Certain small-business SIMPLE plans will have enhanced catch-up limits under SECURE 2.0. | Small business employees |
| Transition Period | Administrative relief runs until Dec. 31, 2025. Plans won’t be penalized for noncompliance before then. | Employers and plan sponsors |
Differences From Proposed Rules
The final regulations generally follow earlier proposals but include refinements:
- More flexibility in determining the $145,000 threshold across multiple employers.
- Clearer correction methods if catch-ups are made incorrectly as pre-tax instead of Roth.
- Special timing accommodations for governmental and collectively bargained plans.
These adjustments give both employers and employees more clarity and time to prepare.
Traditional vs Roth Contributions
Understanding why this change matters requires a comparison:
- Traditional contributions are made pre-tax, lowering taxable income today, but withdrawals in retirement are taxed as ordinary income.
- Roth contributions are made after-tax, providing no immediate deduction, but withdrawals in retirement are generally tax-free if rules are followed.
For high earners, this shift means less ability to reduce taxable income now, but it may provide future benefits with tax-free retirement withdrawals.
What High Earners Should Do Now
Since mandatory Roth catch-ups won’t begin until 2027, there is time to prepare. High-income employees should:
- Review prior-year wages to see if they exceed the $145,000 threshold.
- Confirm whether their retirement plan supports Roth contributions, as amendments may be needed.
- Consider tax planning strategies: pay tax now vs. later, expected retirement income levels, and estate planning impacts.
- If between ages 60–63, take advantage of the super catch-up limits to boost retirement savings further.
The IRS’s final regulations on mandatory Roth catch-up contributions under SECURE 2.0 represent a pivotal change for retirement savers.
Starting in 2027, high-earning employees age 50 and older will no longer have the option of making pre-tax catch-up contributions.
Instead, all such contributions must be Roth. With added opportunities like the super catch-up for ages 60–63 and updates for SIMPLE plans, the landscape for retirement planning has shifted.
The key is to plan ahead, review income thresholds, and make informed decisions about how and when to contribute.
FAQs
When do these changes officially start?
Mandatory Roth catch-ups for high earners begin with taxable years starting after December 31, 2026. Until then, pre-tax catch-ups remain an option.
What if my plan doesn’t allow Roth contributions yet?
Employers must update plans to accommodate Roth catch-ups before 2027. Employees should verify with HR or plan administrators.
Does the $145,000 income threshold stay fixed?
No. The threshold is indexed for inflation, meaning it will gradually rise over time. High earners should monitor the adjusted figure each year.
