You’re 50, earning $150,000, and your plan’s Roth catch-up rule just changed the math on where those extra retirement dollars should land. Send them to the Roth bucket inside the workplace plan and the money is locked away until 59½. Route those after-tax dollars into a regular brokerage account and you keep liquidity but give up decades of tax-free growth. That is the tension a listener named George brought to The Retirement and IRA Show, Q&A episode #2633, hosted by Jim Saulnier and Chris Stein.
George’s 403(b) will not permit in-service distributions until 59½, so a Roth contribution today is money he cannot touch for roughly nine and a half years. He also asked whether workers in their early 60s have a special reason to route the enhanced catch-up into the Roth.
The Rule That Forced The Question
The SECURE 2.0 mandatory Roth catch-up provision took effect January 1, 2026. It was enacted in 2022 as part of SECURE 2.0 and originally scheduled for 2024, but was delayed to give employers and plan administrators time to prepare. It applies to workers who earned $150,000 or more in FICA wages the prior year. The original statute set the threshold at $145,000; the amount is adjusted annually for inflation.
To determine status, workers check Box 3 of their prior-year W-2, the box showing earnings subject to Social Security tax. Side-gig income on a 1099 or partnership income on a K-1 does not count toward the threshold. For affected workers, all catch-up dollars must go to a Roth account. If the plan does not offer a Roth option, no catch-up contributions are allowed at all.
For 2026, the elective deferral limit is $24,500. The catch-up for ages 50 to 59 and 64 or older is $8,000, bringing the total to $32,500. For ages 60 through 63, the enhanced catch-up is $11,250, for a total of $35,750. At age 64 the enhanced amount reverts to $8,000. The combined employee and employer limit is $72,000.
The Case For The Roth
Saulnier framed the choice bluntly. “You have either to put money in your brokerage account, which by default is after-tax dollars, or you’re going to be forced to put those after-tax dollars in a Roth. You can no longer put them in a deductible 401, defer the taxes, and ostensibly pay taxes at a lower rate later in retirement. That’s what the government was trying to crack down on. They tried. It’s a revenue raiser, folks.”
The costs of the taxable route are concrete. “If he puts it in the brokerage account, the growth will be taxed as cap gains. Any non-qual dividends or interest it generates will be taxed as income in that given year, and there’ll be no protection from bankruptcy and no protection, most likely, from creditors.”
Inside the Roth, “it’s going to be protected from bankruptcy. It’s going to be perhaps protected from creditors. And you definitely will get protection from future tax increases because it’s a Roth wrapper. So except for the liquidity issue that I just mentioned, I can’t see why you would want to put it in a regular brokerage account.” Those creditor and bankruptcy protections for a 403(b) can hinge on whether the plan is covered by ERISA, which varies by employer. Treat that as a question for a qualified attorney.
Chris Stein cut to the tax point. “The default in my mind should be Roth because we’re talking after-tax dollars either way. So you’re not avoiding income tax or deferring it, you’re going to be paying the income tax one way or the other. In the Roth, then no taxes to worry about ever again.” He added that “in the non-qual, you open yourself up to potential taxes” every year the account throws off dividends or realized gains.
The Liquidity Tradeoff
Nine and a half years is a long lockup. Money going into George’s 403(b) Roth cannot be reached without penalty until 59½. A brokerage account is fully accessible. If you have thin cash reserves, lumpy income, or a large expense on the horizon, that liquidity carries value the Roth cannot match. Fidelity’s Angela Capek, quoted in The New York Times, noted that since 2024 there has been no requirement to start taking money out of a Roth 401(k) after a certain age, which strengthens the case for parking money there once emergency needs are covered elsewhere.
The Early-60s Angle
For ages 60 through 63, the $11,250 enhanced catch-up pushes more dollars through the Roth door for high earners. More tax-free compounding, but a larger current-year tax bill too. Saulnier warned about plan quality: “403s have a horrible reputation in my industry. They’ve been cleaned up over the last decade a lot, but they were the Wild West in the past where school districts would sometimes have 2 or 3 or 4 different 403 providers.” He was critical of legacy insurance-company and asset-manager products that historically dominated those menus. Fees and provider choice matter.
Where George’s Peers Stand
Most of George’s cohort is not using the Roth option. Fidelity’s Q3 2025 retirement analysis puts Roth 401(k) adoption at 14.5% for Gen X and 17.5% overall. The average 401(k) balance for the 50 to 54 age group is $199,900. Gen X averages $217,500 in 401(k) assets and $103,952 in IRAs, with an employee contribution rate of 10.4%. Meanwhile, 54% of Gen X do not think they will be financially prepared for retirement, and the cohort estimates it needs $1.57 million versus a national average of $1.26 million.
What To Do Next
Model both paths on your own numbers, confirm your plan’s Roth option, and speak with a qualified tax professional or financial advisor before deciding. This is educational information, not personalized tax, legal, or investment advice.
Contact [email protected] for any questions or corrections.
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