Retirement Tax Changes for High Earners: What You Need to Know

Roth catch-up contributions and SECURE 2.0

One important update under SECURE 2.0 affects catch-up contributions for higher earners.

Catch-up contributions allow individuals to add extra savings to retirement accounts once they reach age 50. These additional contributions have traditionally been made on a pre-tax basis through accounts such as a traditional 401(k), but that will no longer be an option for some workers.

Beginning in 2026, individuals age 50 or older with ages over $145,000 (indexed for inflation) from their employer will generally be required to make catch-up contributions to employer retirement plans on a Roth (after-tax) basis, assuming the plan offers a Roth option.

While this shifts how the tax treatment works today, it also creates new planning opportunities. Roth contributions mean paying taxes now, but qualified withdrawals in retirement can be tax free. For many investors, this change can add valuable tax diversification and greater flexibility when drawing income in retirement.

Collin Ritzinger, Personal Trust Manager at Associated Bank, explains, “For high earners, retirement planning isn’t about minimizing taxes this year. It is about controlling when and how taxers are paid over decades. For example, there’s often a key planning window between retirement and RMD age. These years can present opportunities to intentionally recognize income through Roth conversions or distributions at lower marginal rates.”

The longstanding Roth vs. traditional debate has grown more consequential as retirement tax rules evolve. Choosing the right approach can significantly affect your long-term wealth, tax liability and legacy planning.

• Traditional accounts: Contributions are made pre-tax, providing a current-year tax deduction. Withdrawals in retirement are taxed as ordinary income, which can be advantageous if you expect your tax rate to be lower later.
• Roth accounts: Contributions are made with after-tax dollars, but qualified withdrawals are tax-free. This can help hedge higher future tax rates and provides flexibility for estate planning.

Why does strategic diversification matter? Combining both account types can give you more control over your taxable income in retirement, allowing you to optimize withdrawals, reduce RMDs and potentially leave more tax-efficient assets to your loved ones.

“Having a mix of Roth and traditional assets gives clients more control,” Ritzinger says. “When tax laws change—or income changes—you want options.”

RMD rules under SECURE 2.0

RMDs (required minimum distributions) are the minimum amounts the IRS mandates you withdraw annually from eligible retirement accounts. (Roth 401(k) and Roth 403(b) balances are subject to RMD if they remain in the employer plans.) In most cases, you must begin taking distributions from your traditional IRA and employer-sponsored retirement plans if you are turning 73 between 2023–2032.

The RMD rules under SECURE 2.0:

• RMDs now begin at 75 for workers born in 1960 or later.
• Roth IRAs no longer require RMDs during the account owner’s lifetime.
• Traditional accounts are still subject to mandatory withdrawals.

This creates valuable planning years between retirement and RMD age, when taxes can often be managed more efficiently.

Tax planning for inherited IRAs

Most non-spouse beneficiaries must fully distribute inherited IRA assets within 10 years, and in many cases are also required to take annual distributions during that period, depending on the decedent’s RMD status. This can create a larger tax burden for heirs.

“The loss of the lifetime stretch IRA changed the conversation,” Ritzinger notes. “Now we’re planning not just for the retiree but for the next generation and the tax impact they’ll face.”

Because Roth withdrawals are tax-free, Roth strategies have become increasingly important for estate planning.

Why tax-efficient retirement withdrawal strategies matter

Building wealth is only part of your retirement plan. How you withdraw your money can have just as much impact on the outcome. Without planning, retirees often shift from low tax brackets to significantly higher ones once RMDs and Social Security begin—creative avoidable “tax cliffs.” Thoughtful withdrawal strategies help manage taxes, preserve more of your savings and create greater flexibility throughout retirement.

Common approaches include:

• Relying on income sources such as wages or other cash flow when possible, allowing retirement assets more time to grow.
• Turning to Roth accounts to help avoid pushing more pre-tax withdrawals into already elevated tax brackets.

• Planning withdrawals earlier in retirement, before RMDs begin, to reduce the risk of being forced into larger taxable withdrawals later.

• For charitably inclined individuals, strategies like Qualified Charitable Distributions (QCDs) can help satisfy RMDs while reducing taxable income.

The broader goal is simple: spread taxes more evenly over time and avoid unnecessary spikes that can erode long-term wealth. With the right strategy, withdrawals can become another powerful tool for managing taxes and supporting the retirement you envision—with the confidence to live life to the fullest.

When Roth conversions make sense

Because of the tax-free nature of Roths, there are many situations when they are particularly helpful.

One way investors use them is through a Roth conversion—moving assets from a pre-tax retirement account into a Roth account and paying the income tax today. While that means taking on taxes in the present, the tradeoff is the potential for tax-free growth and tax-free withdrawals in the future.

The real advantage comes from control. Many high earners benefit from “filling up” lower tax brackets in early retirement to reduce lifetime tax burdens. By choosing when to recognize that income, you can potentially convert assets in years when your tax rate is lower. Over time, that flexibility can help smooth out taxes, reduce surprises later in retirement and create another source of tax-efficient income when you need it most.

Roth conversions can be particularly effective:

• In early retirement before Social Security and RMD income begin: This “gap period” often presents lower taxable income years, allowing you to convert at reduced marginal rates.
• During temporary low-income years: For example, after a business sale, career transition or market downturn when taxable income is unusually low.
• While residing in a no-income-tax state: Converting before relocating to a higher-tax state can materially reduce total tax liability.
• To reduce future RMD exposure: Lower pre-tax balances mean smaller RMDs, potentially limiting bracket creep, Medicare premium surcharges (IRMAA) and taxation of Social Security benefits.
• To transfer tax-free assets to heirs: Roth accounts are not subject to lifetime RMDs for the original owner and can provide beneficiaries tax-free distributions (subject to distribution timing rules).

Timing is critical. Conversions are typically least advantageous during peak earning years when marginal rates are highest, unless you anticipate significantly higher tax rates in retirement. A structured, multiyear conversion plan often produces better outcomes than a single large transaction. However, conversions must be carefully coordinated with Medicare premium thresholds (IRMAA), capital gains exposure and overall income planning to avoid unintended tax consequences

The bottom line for high earners

Recent legislative changes—particularly the SECURE 2.0 Act—have pushed retirement planning beyond simply saving more. Today, it requires a broader, longer-term approach that considers not only how wealth grows, but also how it will be taxed, withdrawn and eventually passed on to the next generation.

“The biggest mistake is focusing on one year at a time,” Ritzinger says. “The real value comes from looking at taxes across decades and across generations.”

And for high earners, success often comes down to these key areas of focus:

• Balancing Roth and traditional savings. Building a mix of pre-tax and Roth assets can provide valuable tax diversification, giving you more flexibility to decide which accounts to draw from depending on your tax situation in retirement.
• Managing future RMDs. Large pre-tax balances can lead to sizable, required withdrawals later in life. Proactive planning can help reduce the risk of being pushed into higher tax brackets when those distributions begin.
• Coordinating withdrawals to manage tax brackets. Thoughtful withdrawal strategies, like deciding when and from which accounts to take income, can help smooth out taxes over time and avoid unnecessary spikes.
• Integrating estate planning with tax strategy. Retirement and estate planning are increasingly connected. Aligning these strategies can help preserve more wealth for heirs while managing the tax impact across generations.

The common thread is intention. With the right strategy and a personalized planning approach, high earners can turn these changes into opportunities to create greater tax efficiency, flexibility and long-term impact for their wealth.

Value beyond the numbers

Our Associated Bank Private Wealth team believes effective planning requires coordination across investments, tax strategy and estate planning. That’s why before any planning is done, we listen. Understanding what’s most important to you shapes everything that comes next.

By looking at your entire financial picture—cash flow, investments, tax strategy, legacy planning, charitable giving—we get a holistic view and gather insights that help us get you to the future you’ve envisioned.

Ready to build on your success and navigate what’s next? Let’s work together to ensure you have a plan that puts you and your financial well-being first.