The Roth Catch-Up Mandate Is Coming: 5 Concrete Moves High-Earners Should Make in 2025
Rohit Padmanabhan

If you’re 50-plus and earning more than $145,000 in FICA wages from your employer, the way you make 401(k) “catch-up” contributions is about to change—permanently. Section 603 of the SECURE 2.0 Act will force those catch-ups to go into a Roth (after-tax) bucket starting January 1, 2026, and the IRS has confirmed there will be no more extensions to the rule.milliman.com

Mid-2025 is your sweet spot: there’s time to prepare, but the window is closing quickly. Below are five actions—tailored for physicians, attorneys, business owners, and tech pros with equity—that you can take now to avoid a very expensive surprise next year.

 

1. Decode Section 603 in 60 Seconds

  • Who’s affected? Anyone age 50+ whose prior-year wages from the plan sponsor exceed $145,000, indexed for inflation (still $145 k for 2025).

  • What changes? Catch-up contributions must be Roth; pre-tax catch-ups will be rejected. Plans without a Roth option will simply bar high-earners from making any catch-ups.

  • When? Tax years beginning after 12/31/2025—but payroll and plan changes need to be in place well before the first January 2026 paycheck.milliman.com

Quick math: Under 2025 limits, a 52-year-old can defer $23,500 + $7,500 = $31,000. From 2026 on, that $7,500 must be Roth if the wage threshold is met.

2. Pull Your 2024 W-2 & Project 2025 Income

  • Physicians & Attorneys: Add moonlighting, call pay, or partnership draws that hit payroll boxes 1 & 3—they count toward FICA wages.

  • Tech Pros: Include RSU vests that trigger ordinary income; they also raise your FICA wage number.

  • Why now? Knowing whether you’ll cross $145 k tells you which bucket (pre-tax vs. Roth) you’ll be using in 2026—and whether cash-flow adjustments are needed.

3. Confirm Your Plan Has a Roth Lane (or Push Your Employer to Add One)

  • Business Owners: Plans must be formally amended to include a Roth feature and to code catch-ups automatically as Roth for impacted employees.

    • Payroll systems need a new deduction code; start testing in Q3 2025.

  • Employees: Ask HR these two yes/no questions:

    1. “Does our 401(k) already accept Roth salary deferrals?”

    2. “Will the system auto-convert my catch-ups to Roth in 2026?”
      If the answer to #1 is no, lobby now—otherwise you lose catch-ups altogether.

4. Re-Engineer Cash Flow & Tax Withholding

A Roth catch-up uses after-tax dollars, so each $7,500 contribution could cost a 37 %-bracket earner about $2,775 in extra take-home hit compared with a pre-tax deferral.

Scenario (2026) Pre-Tax Catch-Up Roth Catch-Up
Contribution $7,500 $7,500
Immediate tax saved (37 %) $2,775 $0
Net paycheck impact $4,725 $7,500

  • Action steps:

    • Increase today’s withholdings gradually so January 2026 doesn’t sting.

    • Redirect any 2025 bonus or RSU sale proceeds into a high-yield cash bucket earmarked for next year’s Roth catch-ups.

5. Coordinate With Other SECURE 2.0 Tweaks

  • Age 60-63 “Super Catch-Up.” Starting 2025, those specific ages can put in $11,250 instead of $7,500. It’s still subject to the Roth mandate if you’re over the wage cap.

  • Mega Backdoor Roths. If your plan already allows after-tax contributions above the $69,000 combined limit, consider using those dollars for additional pre-2026 Roth space.

  • Equity Compensation Timing. If you hover around $145 k, you might defer an option exercise or sell RSUs in a different tax year to drop below the threshold—talk to your CPA first.

Case Study: Dr. Nguyen, Orthopedic Surgeon, Age 52

2025 2026 (under new rules)
FICA wages $290,000 $300,000
Regular deferral $23,500 (pre-tax) $23,500 (pre-tax)
Catch-up deferral $7,500 (pre-tax) $7,500 Roth
Net paycheck change — ↓ $2,775 (37 % bracket)

Dr. Nguyen buffers the hit by:

  1.  Shifting 10 % of 2025 moonlighting pay into a savings account now.

  2. Working with her practice’s TPA to enable Roth and deemed-Roth mapping.

  3. Cutting January bonus withholding by 6 % to keep take-home stable.

 

The Takeaway

The Roth catch-up mandate is not a headline to bookmark for later—it’s a structural change that requires plan amendments, payroll code rewrites, and personal cash-flow prep this year.

  1. Pull your W-2 and decide if you’re over $145 k.

  2. Verify your plan’s Roth readiness.

  3. Build the after-tax cash cushion now.

 

Need a second set of eyes? Reach out and we’ll walk through a personalized “Roth-Readiness” checklist before summer ends.

 

 

 

 

Sources

  1. IRS News Release 2023-152, “Administrative transition period for new Roth catch-up requirement”

  2. IRS & Treasury Proposed Regulations on Section 603, Feb 2025

  3. Employee-Fiduciary Blog, “High Earners Must Contribute Catch-Ups as Roth,” Feb 2025 milliman.com

  4. Milliman Insight, “SECURE 2.0—Super Catch-Ups & Roth Mandate,” Mar 2025