The SECURE 2.0 catch-up rule for Roth accounts might impact the final years of retirement savings for California's professionals who are nearing retirement. Starting in 2026, some higher-paid workers will startpaying catch-up contributions after taxes.
The change is significant in California, where high taxes onstate income can be more noticeable as a result of losing the deduction. Hire a tax professional (like a tax attorney in Santa Monica) who can help you during difficult times.
Catch-up contributions are typically allowed to workers age 50 and over for an extra contribution above the 401(k) limit. The 2026 standard elective deferral limit for a 401(k) is $24,500, plus a possible $8,000 catch-up contribution for those who are age 50 or older. Catch-up limits are generally higher for workers who turn 60 between 60 and 63, $11,250, versus $1,000 for those under 60.
If a higher-paid individual receives more than the threshold from the plan sponsor for a prior year, they will be required to make catch-up contributions in the form of a Roth contribution under SECURE 2.0. For 2026, that threshold is $150,000.
These contributions typically are not eligible for the taxdeduction that's normally associated with a traditional pre-tax 401(k) contribution.
It can be a big distinction for high earners such as technology workers, executives, physicians, attorneys, business owners, and others in California.
Typically, a pre-tax contribution will lower your current taxable income. Contributions are made after tax, but distributions from the Roth are generally tax-free.
When the current deduction is taken away, it may feel like a bigger sacrifice for those who already have a significant California income-tax bill.
However, the most important fact is that the new rule will not remove the option to make catch-up contributions. It changes their tax treatment for affected employees.
Pay particular attention if you:
Are aged 50 years or more.
Make more than the required wage amount.
Earn sizeable bonuses and/or equity.
Are employed in a technology firm or big company.
It's going to be a huge increase in pay.
Are eligible for the higher catch-up limit and are between the ages of 60 and 63.
Retirement-plan planning may be particularly significant when you receive stock compensation or bonuses since the rule depends on the qualifying wages from the previous year. Once you have hired an expert (like a Pasadena tax attorney), you won’t need to worry much.
Don't stop saving because of the Roth. Rather, think about designing a holistic
retirement plan instead.
As long as your plan allows, you'll typically be able to make standard elective deferrals on a pre-tax basis, limited to specific amounts each year. Consider splitting the contributions between regular and catch-up contributions, which will help save current-year deductions.
A Roth conversion might be helpful as part of a retirement plan, but can result in taxable income in the conversion year. Before acting, California residents should consider any federal or state repercussions.
If necessary, high-income taxpayers can consider making backdoor Roth IRA contributions. The pro-rata component of the account, however, could lead to some unforeseen tax implications if you have existing pre-tax traditional, SEP, or SIMPLE IRA balances.
Deferred compensation plans may also be offered to some executives who are not qualified. These may be susceptible to moving when the compensation is recognized, but it is a complicated mix of tax, investment, and employer-credit issues.
The IRS released final regulations on the Roth catch-up provision, which are effective in general for contributions made for taxable years beginning after Dec. 31, 2026 (with certain transitional and plan provisions).
Hence, neither employees nor employers should use old versions of the summary of the rule.
The Roth catch-up provision in SECURE 2.0 is a big change for retirement savers with high earnings. This could affect residents of California more because they receive the immediate tax deduction, but have to pay after they contribute.
The smartest thing is not necessarily to give up more; it's to coordinate pre-tax savings, Roth strategies, equity compensation, and deferred compensation in such a way that the retirement plan plays with the overall California and federal tax picture.
Posted by Waivio guest: @waivio_christy-evangeli
