The Roth Revolution: How SECURE Act 2.0 Supercharges Your Contributions
I’ve long been an advocate for building up the Roth bucket—and with the passing of SECURE Act 2.0, it just got a whole lot easier.
Before this legislation, Roth IRAs and Roth workplace plans (like 401(k)s and 403(b)s) were the primary avenues for Roth contributions. Now, SECURE Act 2.0 introduces a wave of new Roth-related opportunities. I view this as a significant win for working professionals—but as always, the details matter.
In this article, I’ll break down the four major changes and walk through what they mean from a Financial Planning and Tax perspective:
Elimination of Required Minimum Distributions (RMDs) for Roth employer plans
Introduction of SIMPLE and SEP Roth IRAs
Option for employer contributions to be Roth
Required Roth catch-up contributions for high-income earners
RMDs No Longer Required for Roth Employer Plans
Starting in 2024, Roth accounts in employer retirement plans (like Roth 401(k)s and 403(b)s) will no longer be subject to Required Minimum Distributions (RMDs).
Previously, retirees would often roll Roth 401(k) balances into a Roth IRA at retirement to avoid RMDs. Now, that’s no longer necessary—giving you more flexibility.
Key Considerations:
Investment Options: Keeping the money in your employer plan may limit your investment choices. You’re typically restricted to the plan’s fund menu, which may not offer the freedom to self-direct your investments.
Fees and Oversight: While employer plans are often low-cost, they can require more time and attention from you. And many of the investment options—mostly mutual funds—carry higher internal costs than ETFs or individual stocks.
Withdrawal Rules: Most employer plans send out proportionate withdrawals across all holdings. That can become an issue in down markets, especially if it forces the sale of stock investments at a loss. Personally, I prefer income strategies that allow for drawing from bonds or cash during market dips.
Roth SIMPLE and SEP IRAs Are Now Allowed
Before SECURE Act 2.0, SIMPLE and SEP IRAs were strictly pre-tax. That’s changed. You can now elect Roth treatment for these accounts.
Tax Planning Implications:
Roth Employer Contributions Are Taxable: These contributions will be treated as W-2 income but not subject to FICA. Still, without proper withholding, they can trigger surprise tax bills at filing time.
Advance Planning Is Key: I recommend factoring employer Roth contributions into your annual tax projection to determine if you need to increase withholding or make estimated payments.
Pre-Tax or Roth?
Even though I strongly support Roth growth, I also know it’s not always the best option. If you’re a business owner in your peak earning years, that pre-tax deduction may offer more short-term tax savings. In that case, saving on taxes now and using Roth conversions later in retirement could be the better long-term strategy. However, like many answers when it comes to Financial Planning, it depends on what’s best for the individual’s financial situation.
Employers Can Now Contribute Roth Dollars
One of the most notable changes: employer contributions can now go into the Roth side of your retirement plan.
What Changed:
Employer Matches: These can now be made as Roth contributions.
Non-Elective Contributions: Safe Harbor and other non-elective contributions are also eligible—if they are fully vested.
Profit-Sharing Still Excluded: Those contributions must remain pre-tax.
Watch the Tax Consequences:
Roth employer contributions are taxable to the employee in the year they’re made. Without proper planning, this could result in an unexpected tax bill. An annual tax projection can help you stay ahead of any surprises.
High Earners Must Use Roth for Catch-Up Contributions
This is one of the few provisions in SECURE Act 2.0 that I see as a potential downside. Starting in 2026, high-income earners must make their catch-up contributions to the Roth side of their retirement plan.
Here’s What That Means:
Applies to employees earning over $145,000 (based on prior-year W-2 wages)
Indexed for inflation
Only affects workplace plans—not IRAs
A Few Nuances:
Self-Employed Individuals Are Exempt: The rule focuses on W-2 wages, not net self-employment income.
Changing Jobs Mid-Year? The $145,000 threshold is evaluated per employer. So if you earned under that amount at each employer, you may not be subject to the requirement—even if your total income was higher.
No Roth = No Catch-Up: If your plan doesn’t offer a Roth option, no catch-up contributions are allowed for anyone. This may force many employers to update their plans.
Why This Can Be a Problem:
You lose control. If Roth isn’t optimal for your situation (say you’re in the highest tax bracket), you can’t choose pre-tax anymore.
Planning around it is tough. Short of managing your W-2 income down below the threshold, there’s not much room to plan your way around this rule.
Final Thoughts
The many Roth-related additions in SECURE Act 2.0 are—on the whole—a win for taxpayers. But as you’ve seen, each rule comes with nuance, and some create entirely new planning decisions.
That’s where strategic financial and tax planning really shines. Whether it's coordinating contributions, projecting income, or planning withdrawals, the details matter.
I help working professionals take control of their finances so they can reduce stress, focus on what matters most, and live their most fulfilling life. If you're wondering how these changes affect your long-term plan, I’d love to help you sort through it all and make the most of your Roth strategy.
