How Does the New Tax Bill Affect Your Roth IRA?

If you’re wondering how the new tax bill affects your Roth IRA, the SECURE 2.0 Act of 2022 is still rolling out changes through 2026, and this year brings the one most people will actually feel: high earners can no longer make pre-tax catch-up contributions to a workplace retirement plan. Those dollars must now go into a Roth account. Alongside that mandate, the annual Roth IRA contribution limit rises to $7,500, income phase-out ranges widen, and several other provisions already in force have changed how Roth money moves in and out of employer plans, 529 accounts, and small business retirement plans.

What You Can Contribute in 2026

The base Roth IRA contribution limit for 2026 is $7,500, up from $7,000 in 2024 and 2025. If you’re 50 or older, you can add another $1,100 in catch-up contributions, for a total of $8,600.¹ The IRA catch-up figure sat at $1,000 for decades before SECURE 2.0 added an annual inflation adjustment starting in 2024.

Whether you can contribute at all still depends on your modified adjusted gross income. For 2026:

Single or head of household: contributions phase out between $153,000 and $168,000 of MAGI.
Married filing jointly: the phase-out runs from $242,000 to $252,000.

Those ranges are wider than the 2024 thresholds, which cut off at $161,000 for single filers and $240,000 for joint filers.² Inside the window, your allowed contribution shrinks proportionally. Above the top of the range, direct Roth contributions are off the table.

Mandatory Roth Catch-Ups for High Earners

This is the provision most likely to catch people off guard. If your wages from a single employer exceeded $150,000 in the prior calendar year, any catch-up contributions you make to that employer’s 401(k), 403(b), or governmental 457(b) plan must go into a Roth account.³ The pre-tax option for those dollars is gone. The wage threshold is indexed for inflation annually.

The rule was originally supposed to kick in for 2024. The IRS granted a two-year administrative transition period under Notice 2023-62, during which pre-tax catch-up contributions remained acceptable regardless of income.⁴ That grace period ended December 31, 2025. The mandate is now live.

One technical note. The IRS issued final regulations in late 2025, but the detailed compliance guidance in those regulations applies for taxable years beginning after December 31, 2026. For the 2026 plan year, employers must comply using a “reasonable, good faith interpretation” of the statute.⁵ If your plan hasn’t communicated how it will handle the change, ask HR. A plan that fails to properly designate these contributions as Roth could face disqualification.

Enhanced Catch-Ups at Ages 60 Through 63

Separately, SECURE 2.0 created a higher catch-up limit for participants who are 60, 61, 62, or 63. For 2026, if you’re in that age window and participate in a 401(k) or similar employer plan, your catch-up limit is $11,250 instead of the standard $7,500.¹ Combined with the $24,500 base 401(k) limit, eligible participants can shelter up to $35,750 in one year.

If your prior-year wages also topped $150,000, the mandatory Roth rule applies to these enhanced catch-ups too. That creates a narrow four-year window where you can move large sums into a Roth account, but you’ll owe income tax on those contributions in the year you make them. Whether the upfront tax cost pays off depends on how long the money stays invested and what your tax rate looks like in retirement.

No More Forced Distributions From Employer Roth Accounts

Before SECURE 2.0, Roth 401(k)s and Roth 403(b)s required minimum distributions starting at age 73 even though individual Roth IRAs never did. Participants who didn’t need the money often rolled their employer Roth balance into a personal Roth IRA just to avoid the requirement.

Starting in 2024, that discrepancy is gone. RMDs no longer apply to designated Roth accounts in employer plans while the owner is alive.⁶ Your money can stay invested and growing tax-free indefinitely, whether it sits in a Roth IRA or a Roth 401(k). The defensive rollover is no longer necessary.

Roth Employer Matches and Nonelective Contributions

Under prior law, every dollar an employer contributed to your retirement plan went into a pre-tax account, even if your own contributions were Roth. SECURE 2.0 changed that. Employers can now offer participants the choice of receiving matching and nonelective contributions directly into a designated Roth account.⁷

The trade-off is straightforward. If you elect Roth treatment for your employer’s match, that match appears as taxable income on your W-2 for the year it’s contributed. You pay tax now instead of in retirement. The contributions must be fully vested before the Roth designation applies, so you won’t owe tax on money you might forfeit if you leave the company early.

This is optional on both sides. Your employer decides whether to offer it, and you decide whether to elect it. If neither party acts, nothing changes. For younger workers in lower brackets who expect their income to climb, paying tax on the match now can lock in a lower rate on money that will grow tax-free for decades.

Rolling Leftover 529 Money Into a Roth IRA

SECURE 2.0 created a new option for families with unused college savings. Starting in 2024, the beneficiary of a 529 education savings plan can roll unused funds into a Roth IRA without owing federal taxes or penalties. The lifetime cap is $35,000 per beneficiary, and you can’t exceed the annual Roth IRA contribution limit in any single year.⁸ For 2026, that caps the annual rollover at $7,500.

Several guardrails apply:

The 529 plan must have been open for at least 15 years before any rollover.
Contributions made to the 529 within the five years before the rollover date can’t be transferred.
The Roth IRA must belong to the same person named as the 529 beneficiary.
The beneficiary must have earned income at least equal to the rollover amount for that year.

The 15-year and five-year lookback periods are what trip people up. Changing the named beneficiary restarts the 15-year clock, so a last-minute switch to access a rollover won’t work. The provision rewards long-term planning, not quick pivots.

Roth Options for SEP and SIMPLE IRAs

Small business retirement plans historically offered only pre-tax contributions. SECURE 2.0 changed that by letting employers who maintain SEP or SIMPLE IRA plans offer a Roth version.⁷ Employees who opt into the Roth version include their salary reduction contributions in taxable income for the year, but qualified withdrawals in retirement come out tax-free.

Participation is voluntary on both sides. For a self-employed person running a one-person SEP, this means you can build a Roth balance through your business plan rather than relying only on a personal Roth IRA. SEP and SIMPLE contribution limits are substantially higher than individual IRA limits, so the Roth option opens up much more after-tax savings capacity for small business owners.

The Backdoor Roth Still Works

SECURE 2.0 didn’t close the backdoor. If your income exceeds the phase-out ceiling, you can still contribute to a traditional IRA (which has no income limit for nondeductible contributions) and then convert that balance to a Roth. Congress has floated proposals to shut this down, but none have become law.

Watch the pro-rata rule. If you hold any pre-tax money in traditional, SEP, or SIMPLE IRAs, the IRS treats your conversion as coming proportionally from both pre-tax and after-tax balances across all your traditional IRAs, which can generate an unexpected tax bill. You report the conversion on Form 8606, which tracks nondeductible contributions and calculates the taxable portion.⁹ A clean backdoor conversion works best when your traditional IRA balance is zero going in.

What the Bill Did Not Change

The five-year rules for tax-free Roth withdrawals are untouched. To pull earnings out completely tax-free, your Roth IRA must have been open for at least five tax years, and you must meet one of these conditions: you’re 59½ or older, you’re disabled, you’re a first-time homebuyer (up to $10,000), or the distribution goes to a beneficiary after your death.¹⁰ The clock starts on January 1 of the tax year of your first contribution to any Roth IRA. Once triggered, it covers all your Roth IRAs going forward.

Money you convert from a traditional IRA or 401(k) has its own separate five-year holding period, and each conversion starts a new clock. If you withdraw converted amounts before five years pass and you’re under 59½, you may owe the 10% early distribution penalty on the portion that was originally pre-tax. After 59½, the penalty disappears regardless of when the conversion happened. Several exceptions can waive the 10% penalty on early earnings withdrawals as well, including unreimbursed medical expenses above 7.5% of AGI, qualified higher education costs, and substantially equal periodic payments.¹¹

The IRS assumes Roth withdrawals come out in a fixed order: contributions first, then conversions (oldest first), then earnings. That ordering rule is actually helpful because your original contributions serve as a tax-free and penalty-free cushion before any converted or earned dollars are touched.

1
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
2
Internal Revenue Service. Amount of Roth IRA Contributions That You Can Make for 2024
3
Internal Revenue Service. Treasury, IRS Issue Final Regulations on New Roth Catch-Up Rule, Other SECURE 2.0 Act Provisions
4
Internal Revenue Service. Notice 2023-62 – Guidance on Section 603 of the SECURE 2.0 Act
5
Federal Register. Catch-Up Contributions
6
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
7
Internal Revenue Service. SECURE 2.0 Act Impacts How Businesses Complete Forms W-2
8
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
9
Internal Revenue Service. 2025 Form 8606
10
Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
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Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions