The IRS’s latest rule for high‑income earners (those earning $150,000+ in Box 5) changes the game for catch‑up contributions. Starting in 2026, any catch‑up contribution you make to an IRA or Thrift Savings Plan will automatically go into a Roth vehicle.
Why the shift matters
Roth contributions are funded with after‑tax dollars, meaning qualified withdrawals are tax‑free. By forcing catch‑up money into Roth accounts, the IRS is essentially nudging high earners to pay tax now rather than later. This can be a boon if you expect your tax rate to rise, but a drawback if you anticipate lower rates in retirement.
In‑plan Roth conversions
Many 401(k) and 403(b) plans now allow “in‑plan Roth conversions,” letting you move pre‑tax balances into a Roth tranche within the same employer‑sponsored plan. With the new catch‑up rule, converting before you hit the $150k threshold can lock in a lower tax rate on the conversion.
Quick checklist
- Confirm your plan supports in‑plan Roth conversions.
- Calculate the tax impact of converting $X now versus paying tax on withdrawals later.
- Consider timing – convert in a low‑income year if possible.
- Watch for state tax differences if you move between states.
Using a retirement calculator can help you model the long‑term benefit of a Roth conversion versus staying in a traditional account.