Background
On December 29, 2022, SECURE 2.0 Act was signed into law by the White House. The retirement legislation includes significant changes intended to help strengthen the retirement system and improve Americans’ financial readiness for retirement. One key change is a requirement that certain retirement plan contributions be made on a Roth after-tax basis.
What is the new requirement?
Starting in 2026, retirement plan participants who turn age 50 or older earning more than $150,000 in FICA wages in the previous year must make any age-based additional catch-up contributions on a Roth after-tax basis.
What does this mean for me?
If your FICA wages for the prior calendar exceed $150,000 and you are contributing beyond the standard (or under age 50) maximum contribution limits. Those additional catch-up contributions must be made on a Roth after-tax basis.
If your FICA wages for the prior calendar year are below $150,000, you are not affected. Your additional catch-up contributions may be made on either a pre-tax or Roth after-tax basis.
What are the contribution limits?
For 2026, additional retirement plan contributions beyond the standard IRS maximum contribution limit ($24,500) are:
- Age 50+ - You may contribute an additional $ 8,000 over the $24,500 limit
- Age 60-63 - You may contribute an additional $11,250 over the $24,500 limit
Example:
- You are age 58
- Your prior year FICA wages exceed $150,000
- You contribute beyond the standard $24,500 limit
You may contribute pre-tax and/or Roth after-tax dollars up to the standard $24,500 limit.
Any contributions above $24,500 ($8,000) must be bade on a Roth after-tax basis.
What are FICA wages?
FICA wages refer to the portion of your earnings that are subject to the Federal Insurance Contributions Act (FICA) taxes, which fund Social Security programs. These wages are those as defined in Section 3121(a) of the Internal Revenue Code, which are wages subject to FICA.
Where can I find my FICA wages?
You can find your FICA wages on your prior year W-2, Box 3 - wages for Social Security taxation purposes.
What are Roth contributions?
The key thing to know is that Roth contributions are taxed now but potential growth is tax-free, giving you more control over your retirement income. Here’s a straightforward comparison so you can see how Roth contributions stack up against a traditional pre-tax retirement plan contribution.
Roth contributions: You pay taxes when you make contributions, but when you take a qualified distribution, you won’t owe taxes on that money or any growth (as long as you’re age 59½ and your first Roth contribution was made at least 5 years ago).
Traditional pre-tax contributions: Your money goes into your account without being taxed, which can lower your taxable income now—but you’ll pay taxes when you eventually take a distribution.