Starting January 1, 2027, high-earning workers will face a major shift in how they save for retirement. The IRS finalized rules under the SECURE 2.0 Act that require catch-up contributions above certain income thresholds to go into Roth accounts rather than traditional pre-tax accounts.
Here's what changed. Workers age 50 and older can normally make catch-up contributions of $7,500 to their 401(k), 403(b), or similar plans in 2024, on top of the standard $23,500 limit. Under the new rules, those earning over $145,000 in 2023 (adjusted annually for inflation) must direct any catch-up contributions to a designated Roth account instead of the traditional side of their plan.
This matters because Roth contributions go in after-tax dollars. You pay income tax now rather than deferring it until retirement. The advantage: future withdrawals come out tax-free. The drawback: your immediate tax bill rises.
For high earners chasing extra retirement savings room, this creates real planning decisions. Your standard catch-up goes to Roth. If you want to stack more pre-tax money into your plan, you'll need to work within other limits. You cannot simply shift catch-up dollars between buckets once 2027 arrives.
Employers must prepare now. Your plan administrator needs to update systems, identify who qualifies for the new Roth catch-up rules, and communicate changes to affected workers. Many companies are still building compliance into their payroll software.
If you earn above the threshold and turn 50 between now and 2027, start thinking through your tax strategy. Running the numbers with your accountant makes sense. Consider whether Roth conversions elsewhere in your plan or IRA might align with the new catch-