The following information is very important if you are involved in a 401k plan, age 50 or greater and participate in the extra”Catch Up” provisions allowed, HOWEVER there is very little action needed at this time, only planning items for the year 2026!
On December 29, 2022 the Secure Act 2.0 (named 2.0 because it was a second additional add on version of of a late 2019 bill aka Secure Act) mandated Catch UP contributions (Extra Retirement Contributions available only to those age 50 or greater) be made in the form of After Tax Roth Contributions. Originally this mandate was to start in earlier years, but due to needed time to prepare for these changes, these rules go into effect at of 1-1-2026
What is the mandatory Roth Catch up Rule?
If your income was over $150k in 2025 and If you participate in the :Catch Up” 401k amount (Extra amount available to save in your 401k – for 2026 – $8k for all but age 60-63 you get Super catch up of $11,250) this catch up must be in the form of a Roth after tax contribution
Once a contribution is automatically (Employers are supposed to automatically adjust to Roth once the maximum pre-tax levels are attained – We will see, this is complicate) there will be two buckets of money, a Pre-tax and a Roth within the 401k.
What are the tax and planning techniques?
Because this extra Catch Up amount is not pre-tax, there will be slightly higher taxes as the switchover from pre to after tax contributions, EVEN though the contributions are still deducted from pay!
Pro-Tip: Roth Accounts have a 5 year seasoning mandate, meaning they must be open for 5 years to get the full tax benefit or Tax Free withdraws of appreciation. A rollover into a new Roth account resets the 5 year seasoning, so it is advisable to open a Roth if you do not have one in 2026!
Matching contributions can “in some instances” be requested into the Roth-this creates a tax scenario we do not like a this time and are leaning towards pre-tax matching on all contributions.
Bottom line –
While you may have not had a Roth before, if mandated into one next year, a new personal Roth account needs to be opened.
Expect more taxes as the switch occurs, avoid company matching into the Roth.
Double check the switchover occurs after the $24,500 pretax is met.
Have a Great “Roth Mandatory Contribution” Day!
John A. Kvale CFA, CFP
AI Content Authenticity: AI created the Roth Pig. All of the following text content has been completed by myself and has not been edited or created by AI. Occasionally we do use AI for images and will note when appropriate.
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
