Beginning January 1, 2026, certain higher-income retirement plan participants who make catch-up contributions will generally need to make those catch-up contributions as Roth (after-tax) rather than pre-tax.
Now’s the time to identify impacted clients, verify plan Roth readiness, update 2026 tax projections early, and document the strategy so clients aren’t surprised at tax time.
Why it Matters
This rule is one of the most practical SECURE 2.0 updates because it touches real paychecks and real client questions. Many clients aged 50 and above have a familiar routine: maximize deferrals, add catch-up contributions, and assume those dollars reduce taxable income. In 2026, for the clients who fall under the new requirement, that last assumption changes.
For financial professionals, the opportunity lies in leading with clarity. Clients don’t need legislative language. They need a simple explanation, a quick estimate of what changes, and a plan that keeps them on track.
What Changed Under SECURE 2.0?
SECURE 2.0 introduced a rule that requires certain higher-income participants to make catch-up contributions on a Roth basis. In plain English, it means that those catch-up dollars are taxed now, rather than being deferred until retirement withdrawals.
This doesn’t eliminate catch-up contributions. It simply changes the tax treatment for some individuals and, by extension, the way you should coordinate withholding, estimated payments, and broader Roth strategy conversations.
Who’s Affected?
Most advisors can evaluate the rule using three filters:
- Is the client eligible to make catch-up contributions?
Catch-up contributions apply to participants who meet the applicable age requirements and are contributing to eligible workplace plans. - Are the client’s prior-year wages above the threshold that triggers mandatory Roth catch-ups?
This rule is commonly understood as wage-based, not a broad household-income test. That distinction matters for business owners and clients with significant investment income. - Does the employer plan support Roth contributions and Roth catch-up processing?
Even if a client is required to make Roth catch-ups, the plan has to be able to administer them correctly.
Tip: Wages vs. Income
Clients often assume “high income” automatically equals “subject to the rule.” That’s not always true. If the client’s compensation is structured so that doesn’t cross the wage threshold, they may not be subject to mandatory Roth treatment. Conversely, a highly compensated W-2 employee may be subject to it even if the household has other planning priorities.
Related: What to Know About Trusts & IRAs Under the New RMD Rules
How Roth Catch-Ups Change Planning Conversations
The best framing is a planning update, not a compliance headline. Clients want to know what changes, what it costs, and why it can still be a “win.”
Current-Year Tax Impact
Roth contributions are after-tax. If a client’s catch-up dollars shift from pre-tax to Roth, taxable income may be higher than it would have been under the old approach. In January, that typically shows up as a withholding conversation. It’s much easier to adjust early than to explain a surprise in April.
Retirement Tax Diversification
Roth dollars can create optionality later. For clients building retirement income plans, a tax-free “sleeve” can support bracket management, Medicare planning, and legacy planning. Even clients who prefer pre-tax savings often appreciate a balanced approach that includes some tax-free retirement income potential.
Coordination with Roth Conversions
Roth catch-ups and Roth conversions can work together, but they can also compete for the same “tax room” in a given year. The goal isn’t to maximize Roth for its own sake. The goal is to keep the client’s overall tax plan aligned with their long-term retirement income strategy.
Take-Home Pay Expectations
Clients often perceive Roth as a change in take-home pay. If cash flow is tight, you can help evaluate options for them such as adjusting deferral rates, updating withholding, or shifting savings between buckets while keeping the retirement plan on track.
What You Should Do Now: A Practical Checklist
Step #1: Identify Potentially Affected Clients
- Age 50+ clients who contribute meaningfully to workplace plans
- Highly compensated employees who maximize deferrals
- Business owners and executives whose plans may have limited Roth features
Step #2: Confirm the Plan’s Roth Capability
- Does the plan allow Roth deferrals today?
- Can payroll process Roth catch-up contributions correctly?
- Has the recordkeeper issued a 2026 operational update or guidance?
Step #3: Updated the Client’s 2026 Tax Plan
- Run a simple projection with catch-up dollars treated as Roth
- Adjust withholding or estimated payments early
- Coordinate with any planned Roth conversion strategy
Step #4: Communicate Without Jargon
- Explain the rule in one sentence
- Show the estimated tax difference
- Reinforce the long-term value of diversification
Step #5: Document the Conversation
- Note plan status, assumptions, and decisions
- Record projection inputs and client preferences
Related: How to Talk Protected Income With Today’s Retirees
Frequently Asked Questions on Roth Catch-Up Contributions
What are Roth catch-up contributions starting in 2026?
Starting in 2026, certain higher-income workplace retirement plan participants who make catch-up contributions will generally need to make those catch-up contributions as Roth (after-tax) contributions rather than pre-tax contributions.
Who’s affected by the 2026 Roth catch-up rule?
Participants eligible for catch-up contributions who exceed the prior-year wage threshold that triggers mandatory Roth treatment, subject to plan rules and implementation.
What should financial advisors do in January 2026?
Identify impacted clients, verify plan Roth readiness, update tax projections and withholding early, and document the strategy to avoid surprises at tax time.
Will this reduce the ability to save for retirement?
Not necessarily. The limits remain. The change pertains to the tax treatment of certain catch-up dollars. The important thing is to ensure the savings plan still aligns with goals and cash flow.
Does Roth automatically mean better?
Roth isn’t automatically better. It’s a tool. The right mix depends on a person’s tax bracket today, the expected retirement income, and the desired level of flexibility later.
What if a plan doesn’t offer a Roth option?
Then focus on readiness and alternatives. Coordinating with the plan sponsor or exploring other savings options may be needed, depending on eligibility and the overall plan.
