In this episode of the One of a Kind Financial Show Daily, host Mike Milligan, joined by co‑host Gary, explains a major change coming with the SECURE 2.0 Act that takes effect on January 4 2026. The law requires that catch‑up contributions for employees age 50+ whose single‑employer FICA wages exceed $145,000 be made as Roth (after‑tax) rather than pre‑tax. Mike walks through who is affected, the immediate tax impact, and how the shift alters retirement‑plan strategy. He highlights plan‑design risk—some employers’ 401(k) or TSP plans do not yet permit Roth contributions—and notes the IRS’s “reasonable‑and‑good‑faith” grace period that gives plans time to update by 2027. The conversation compares Roth catch‑up contributions to Roth conversions, emphasizing that both result in after‑tax dollars but differ in timing. Cash‑flow timing is discussed, stressing the trade‑off between paying tax now versus later. Mike also advises coordinating the new catch‑up rule with other tax‑saving strategies such as charitable giving, municipal bonds, and qualified business deductions. The segment concludes with a pitch for the “one‑of‑a‑kind financial plan” offered by Mike’s firm, outlining its comprehensive tax, retirement‑income, investment, long‑term‑care, and legacy components, and provides a no‑cost, no‑obligation call‑to‑action. A compliance disclaimer clarifies the advisory status of Mike Milligan and the limits of the information provided.
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Welcome to the One of a Kind Financial Show Daily with your host, Mike Milligan. Today is Tuesday, October 28th. We're almost over the hump here into the Thanksgiving and Christmas season, but a little bit left to do and some goals to accomplish by the end of the year. Recently on the One of a Kind Financial Show, our radio show that airs in Norfolk, Virginia, In the surrounding communities in Midland, Texas, and everywhere on the World Wide Web. We talked about the SECURE Act and changes that were coming in 2026. So we are laying the groundwork to prepare our listeners and you, our podcast listeners, for what's to come in 2026. We called this, uh, the segment, uh, or actually the quote that when we were creating the segment, we called it, I wanted the legacy, the government wanted a percentage. And so listen to this podcast and see where that theme comes about in this. Enjoy. this segment. And guys, most of all, be one of a kind.
The SECURE 2.0 Act introduces a paradigm shift beginning January 4th, 2026. Catch-up contributions for certain high-earning individuals must be Roth, not pre-tax. It means that clients who expect a deduction may get a surprise. It's also a change in the timing of taxation And for many, a change in strategy. So we have 8 questions, just under 8 minutes to hear straight from Mike Milligan on this shift. The first one, who gets hit?
Well, this rule applies to employees aged 50 and older whose FICA wages from a single employer exceed $145,000 in the prior year. So if, uh, the catch-up is only allowed for those who are over 50 anyway, Okay. But now what the catch-up used to allow you to do is put pre-tax dollars aside. Right now, going forward in 2026 and beyond, people are going to be surprised next year because anything that involves the catch-up when you earn over $145,000 is now going to go into your plan as Roth, which means it's going to be taxed.
All right. What's the tax impact?
I just explained it a little bit. The tax impact is that it will increase the amount of taxes you will pay in the year because now instead of the catch-up being pre-tax, it's after-tax.
All right. Plan design risk. What do we mean by that?
All right. So not all plans are created equal, just like not all homes are equal, Gary. You know, not all cars are equal. Not all 401 plans, TSP plans, they're not all equal. And some employers don't allow Roth contributions. And if your plan doesn't, there is a period of time to allow the payroll systems and the plan documents to be updated.
All right. The show is the One of a Kind Financial Show with Mike Milligan. I want to thank you for joining us, spending time with us this weekend. Mike is with One Oak Financial and Ideas by Mike. I want to get on a calendar, get you all set up with that comprehensive plan. There's no cost. There's no obligation. 800- 800-748-1838. 800-748-1838. Or text the word IDEAS to 600-700. IDEAS to 600-700. The folks at Ideas by Mike and One Oak Financial standing by ready for your phone call. Get on the calendar. You deserve a more comprehensive plan and you deserve a more confident plan for retirement. Stress-free peace of mind starts by picking the phone. Dial that number one more time, 800-748-1838. Grace period nuance. What is the IRS doing to us?
So what they're doing is they're allowing those plans who don't currently allow for Roth contributions a period of time that is called reasonable and good faith interpretation. It's a window period of time to allow plans to update. All right. So if your plan currently doesn't allow Roth conversions, By 2027 they will, because the IRS is saying this, uh, this after-tax catch-up provision is going into play. Because what, what really— what the IRS really wants, Gary, is they want to get more tax revenue. And taking, taking, take— making employees, uh, contribute to Roth means that the IRS gets more money Now, Roth conversions versus Roth catch-up trade-offs.
What about that?
So how do you— so optimizing these catch-up dollars in Roth versus converting money, uh, you're, you're basically executing the same thing, right? So by putting Roth money in your 401, making contributions to the Roth 401 versus doing a Roth conversion, the tax implications are the same because your, your tax bracket will be the same. Money is going into Roth, money is going in after tax, so it's the same. So the trade-off is, is by doing Roth contributions now, you don't have to do Roth conversions on that money in the future.
Cash flow timing— what do we mean by that?
So it's, it's about when you pay taxes. So, uh, if again, like if you do these Roth contributions now, you're gonna get tax-deferred growth on that money until you need it versus doing pre-tax now and having that money grow and then paying taxes on the future. And so the cash flow timing is about if you can afford to allow these catch-ups to go into Roth and it would— it'll temporarily reduce your cash flow. It will eventually give you tax-free income in retirement or tax diversification.
All right, you're doing great. We got 6 down, 2 to go. We've got a couple of minutes left. Coordination with other strategies.
Well, uh, so there's other strategies like charitable giving, municipal bonds, getting tax-free interest there, and then business income planning. So imagine one of, you know, you've got a a W-2 spouse who has a 401, and then you've got a, you know, somebody in your house who owns a business who's doing things like qualified business deductions. Well, you have to coordinate all of these strategies, right? Making after-tax contributions and Roth as catch-up along with everything else, because taxes are the biggest expense you'll ever pay in your life. It's the number one thing we talk about in the One of a Kind Financial Plan.
So tell us about the one-of-a-kind financial plan that you do for listeners when you meet with them, Mike.
Well, the first thing that I need you all to know is that our team is, uh, has, is full of experts on that can anticipate and knows the changes that are coming in the financial world before they happen, like this change to catch-up provisions. But when we build a one-of-a-kind financial plan for you, we incorporate these changes before they happen. So, the one-of-a-kind financial plan will do a tax analysis because taxes are the biggest expense you ever pay in your life. They'll do a retirement income analysis so that you have the income, a higher income, a potential higher income through a retirement pay raise by analyzing where you currently are, but in making sure you have enough income to last through your whole retirement that will never run out. We do an investment analysis to make sure that you're earning what you need to based off the options that are in front of you, paying the least amount of fees possible. A long-term care plan that makes sure you are cared for through your whole life, and then a legacy plan that where at the end tells your family you love you. We build these one-of-a-kind financial plans, Gary, for our listeners and for people who call in because we believe everyone should live a one-of-a-kind life.
There you go. You heard it from Mike himself. No cost, no obligation. Get a better handle on your financial situation. Starts by picking up the phone and Down this number, 800-748-1838. 800-748-1838. Or text the word ideas to 600-700. The folks are standing by right now. Get on the calendar, get you all set up with that comprehensive plan. One more time on the number before we take our first break, 800-748-1838, or text the word ideas, 600-700.
One last message from our compliance team. As a reminder, Mike Milligan, Certified Financial Planner, is an investment advisor representative of Advisory Alpha LLC, an SEC-registered investment advisor. All opinions expressed by me, Mike, or any podcast guest are solely our opinions and do not reflect the opinions of Advisory Alpha. This recording is for informational purposes only, should not be relied on solely for investment, tax, or legal decisions, and it's in no way intended to communicate or guarantee specific performance or suitability of any security instrument or product as we may have discussed. Investment advisory. Financial planning services offered through Advisory Alpha LLC, a registered investment advisor. Insurance products are provided by Ideas by Mike, a licensed agency located in Norfolk, Virginia, and licensed to do business in all 50 states. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal services. Please consult with your tax or legal professional prior to making decisions related to these issues. If you want us an appointment with Ideas by Mike or One Oak Financial, please reach out via our website. This podcast is produced in conjunction with Mike Milligan LLC.
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