Key Takeaways
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- Roth-only catch-ups begin in 2026. Under the SECURE 2.0 Act, employees earning more than $145,000 will be required to make all catch-up contributions to a Roth account, meaning taxes are paid now instead of later.
- Higher contribution limits for ages 60-63. Starting in 2025, eligible savers can contribute up to $11,250, giving business owners and employees more room to build retirement savings before leaving the workforce.
- Plan updates are essential. Employers should confirm their retirement plans include a Roth feature before 2026 or risk employees losing the ability to make catch-up contributions altogether.
Retirement rules are changing once again, and this time they affect savers age 50 and older. In September 2025, the IRS finalized regulations under the SECURE 2.0 Act, requiring certain catch-up contributions to be made in a Roth-only account. For business owners and their teams, this shift could significantly impact both retirement planning and annual tax bills.
What’s Changing
- Roth is soon to be required for high earners. Starting in 2026, if your wages from your company exceed $145,000 (adjusted annually for inflation), any catch-up contributions you make must go into a Roth account. That means paying taxes now, not deferring them until retirement.
- Bigger window for older savers. The law also increases the catch-up contribution limit for those ages 60-63. In 2025, that means up to $11,250 compared with the current $7,500. For small business owners still building wealth, this “super catch-up” can be a powerful tool.
- Plan design matters. If your 401(k) or similar plan doesn’t include a Roth feature, high-earning participants won’t be able to make catch-up contributions at all until it’s added. That makes 2025 the year to confirm your plan is ready.
Why It Matters for Business Owners
These rules may feel technical, but they affect real-world cash flow and retirement planning.
- Tax timing changes. Without the pre-tax deduction, your adjusted gross income may increase, affecting eligibility for other deductions and credits.
- Strategic trade-offs. While Roth contributions mean a higher tax bill today, they create tax-free income later. For some owners, this shift may actually align better with long-term goals.
- Employee impact. If you sponsor a retirement plan, these rules affect your team, too. Make sure your plan is updated and your employees are informed.
What to Do Now
- Review your plan. Confirm that your plan includes a Roth feature. If it doesn’t, talk with your advisor about adding one.
- Run the numbers. Test how Roth-only catch-ups change your after-tax income projections. Adjust other parts of your plan accordingly.
- Plan for 2026. Use this transition time to prepare payroll, benefits communications, and your personal tax strategy.
If you’d like help modeling how these changes could affect your business and your personal taxes, or for us to work with your financial advisor on a plan, our team is here to guide you.