Crossing $150,000: How the New Roth Rules Change Retirement Strategy

The “grace period” is officially over.

If you earned more than $150,000 in 2025, the IRS just changed your tax strategy for you. Under the final rollout of the SECURE Act 2.0, your W-2 retirement “catch-up” contributions are no longer optional—they are mandatory Roth.

For years, high earners in the 32%+ tax bracket have reflexively chosen “Pre-Tax” to lower their current bill. In 2026, that door has partially closed.

Here is the 2026 playbook for navigating the new mandate, finding the “Schedule C sanctuary,” and maximizing the brand-new “Super Catch-Up.”

1. The 2026 Numbers: What’s at Stake?

Before you adjust your payroll, you need to know the new 2026 limits. The IRS has increased the “base” contribution, but the “catch-up” rules depend entirely on your age and income.

2. The Trigger: Identifying Your “Mandate” Number

The IRS doesn’t use your Adjusted Gross Income (AGI) to trigger this rule. Instead, they look at your qualifying wages from the employer sponsoring your plan for the preceding calendar year.

The Key Threshold: If your prior-year wages exceeded $150,000, your current-year catch-up contributions are mandatory Roth.

Why this is a “trap”: Most high earners are used to looking at their “taxable wages”—the number that shows up after you’ve subtracted your pre-tax retirement contributions. However, the mandate is triggered by roughly your total qualifying wages for the year, as tracked by your employer.” If you earned $155,000 but put $24,500 into your 401(k), your “taxable income” might look safe, but your total qualifying wages will likely still trigger the Roth requirement.

The Strategy: If you are right on the edge of the $150,000 mark, do not assume your pre-tax contributions will pull you under the limit. Check with your payroll department now to confirm how they are tracking your “Roth-eligible wages” for 2026. If your employer’s plan doesn’t offer a Roth feature and you’ve crossed the threshold, you may be barred from making any catch-up contributions at all.

3. The “Schedule C Sanctuary” (The Insider Lever)

This is the piece most corporate HR departments won’t tell you. The Roth mandate is triggered by W-2 wages from the employer sponsoring the plan.

If you are a high-earning creator or consultant with separate 1099 income (Schedule C):

• No W-2 = No Mandate: Because Schedule C income is “self-employment income” and not “W-2 wages,” your Solo 401(k) is currently exempt from the mandatory Roth rule.
• The Play: You can max out your W-2 base contribution ($24,500) at your “day job,” then put your $8,000 (or $11,250) catch-up into your Solo 401(k) as a Pre-Tax deduction.

4. Why “Forced Roth” Isn’t All Bad

If you’re in a top tax bracket, paying taxes now feels like a loss. But for those over 65 (or approaching it), Roth is a Medicare Premium tool.

• IRMAA Control: Medicare Part B and D premiums are based on your income. Traditional IRA withdrawals spike that income; Roth withdrawals do not.
• RMD Immunity: Roth IRAs have no Required Minimum Distributions. While your Traditional 401(k) will eventually force you to take income (and pay taxes), your Roth bucket can grow untouched for your heirs.

5. Your 2026 Action Plan

• Identify Your Threshold: Review your final 2025 pay records to verify your "Roth-eligible wages" for 2026. If your qualifying income exceeded $150,000, you are officially subject to the new mandate.
• Audit Your Payroll: Coordinate with your HR or payroll department to ensure your 2026 catch-up contributions are designated as Roth. If your plan lacks a Roth feature, you may be barred from making these extra contributions altogether.
• Pace Your Contributions: Determine if your plan includes a "true-up" provision. Without it, maxing out your total $32,500 (or $35,750) limit early in the year could cause you to lose out on your employer's matching contributions during later pay periods.
• Leverage the 1099 Side: If you have business income, prioritize your Solo 401(k) for catch-up contributions. Because this income is currently exempt from the mandatory Roth rule, it serves as a critical "pre-tax sanctuary" for your savings.

Does your current business structure allow you to claim the “Schedule C Sanctuary” and keep your deductions?

Click below to subscribe to our newsletter and download my 2026 High-Earner Cheat Sheet. It breaks down the exact “Order of Operations” for maxing out your 401(k) and Solo 401(k) this year, plus you'll receive our 2026 Important Numbers Checklist to keep you ahead of the curve.

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To health and wealth!

Mark Struthers, CFA, CFP®, RMA®

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This commentary is provided for general information purposes only, should not be construed as investment, tax, or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable, but is not guaranteed.