New IRS Regulations on Roth Catch-Up Contributions Under SECURE 2.0

The IRS and Treasury have finalized new regulations on catch-up contributions under the SECURE 2.0 Act. These rules will significantly affect higher-income earners who are age 50 or older and making additional retirement contributions to their workplace retirement plans, such as a 401(k), 403(b), or SIMPLE IRA.

Let’s break down what this means in plain English for individuals, business owners, and professionals — with real-world examples for creators, medical professionals, and entrepreneurs.

What Are Catch-Up Contributions?

If you are age 50 or older, you are allowed to contribute extra money beyond the standard limit to your retirement plan. These are called catch-up contributions.

• In 2025, the standard 401(k) limit is $23,000.
• If you’re 50+, you can put in an additional $7,500 (catch-up).

This provision is designed to help people nearing retirement save more in their peak earning years.

What Changed Under SECURE 2.0?

Beginning in 2027, the rules require that high-income employees (those earning more than $145,000 in the prior year, adjusted for inflation) must make their catch-up contributions to a Roth account instead of a pre-tax account.

• Before: You could choose between traditional (pre-tax) or Roth (after-tax) catch-ups.
• After 2027: If you earn above the threshold, your catch-ups must be Roth.

👉 That means you’ll pay taxes on the contributions now, but withdrawals in retirement will be tax-free.

Special Rules for Ages 60–63

Between ages 60 and 63, you’ll be eligible for even higher catch-up contribution limits than at age 50–59. This allows those approaching retirement to accelerate savings.

Who Does This Impact?

Let’s look at some real-life examples:

🎥 If You Are a YouTuber or TikToker 

Say you’re a successful YouTuber making $200,000 annually through ad revenue, brand deals, and sponsorships. Once you hit age 50, your catch-up contributions will no longer go into a traditional 401(k) pre-tax. Instead, they’ll go into a Roth 401(k). This could increase your current taxable income, but it secures tax-free withdrawals later.

🛒 If You Run a Shopify or Amazon Business 

Imagine you own a Shopify store or Amazon FBA business generating $500,000 in net profit. You’re 52 years old and want to maximize your retirement savings. Since your income is well above the threshold, your catch-up contributions will be Roth-only. This means paying taxes now but enjoying retirement income tax-free, which is especially helpful if your business continues to grow and you expect higher tax rates in the future.

🎬 If You Are a Filmmaker or Creative Professional 

Filmmakers and creatives often have fluctuating incomes. If one year you earn above $145,000, your catch-ups must go to Roth. But in a lower-income year, you might not hit the threshold and could still choose pre-tax. Strategic planning with a CPA is key here.

🦷 If You Are a Dentist or Doctor 

Many medical professionals earn well above $145,000 annually. Starting in 2027, all catch-up contributions will need to be Roth. For high-income doctors and dentists, this could affect cash flow and tax planning. The trade-off: retirement withdrawals will be tax-free, which could save significant money over time.

💼 If You Are a High Net Worth Individual 

If you’ve already built substantial wealth, these new rules may change how you structure your retirement savings. Roth catch-ups can be a powerful estate planning tool, since Roth accounts can pass tax-free to heirs under certain conditions.

What Employers and Plan Administrators Need to Know

• Implementation begins in 2027. Plans need to update systems to accommodate Roth-only catch-ups for high earners.
• Correction guidance included. The IRS clarified how to fix mistakes if catch-ups are not properly classified.
• Special rules for Puerto Rico and government/union plans. Some plans will have extended compliance dates.

Why This Matters for Tax Planning

For many business owners, professionals, and creators, this change will affect when you pay taxes on your retirement savings.

• High earners may see a short-term increase in taxable income.
• Long-term, Roth accounts can provide significant tax-free income in retirement.
• Planning ahead with your CPA is critical — especially if your income fluctuates year to year.

Work With Experts Who Understand Your World

Whether you’re a YouTuber, Shopify store owner, Amazon seller, filmmaker, doctor, dentist, or high-net-worth individual, these changes could affect how you save for retirement. Strategic planning today ensures you’re making the most of your retirement contributions tomorrow.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org