Roth IRA Changes: What You Need to Know

The regulations for Roth Individual Retirement Arrangements (IRAs) evolve through legislative action and annual cost-of-living adjustments from the Internal Revenue Service (IRS). These changes can alter contribution amounts, income eligibility, and the rules for account owners and their beneficiaries. This guide analyzes recent changes to Roth IRAs, clarifying current financial thresholds and new legislative provisions.

Annual Contribution and Income Limit Adjustments

Each year, the IRS evaluates and often adjusts the amount individuals can contribute to a Roth IRA, along with the income thresholds that determine eligibility. For the 2025 tax year, an individual under age 50 can contribute a maximum of $7,000. Those age 50 or older are permitted to make an additional “catch-up” contribution of $1,000, bringing their total possible contribution to $8,000 annually. These limits apply to the total contributions made to all of an individual’s IRAs, including both Traditional and Roth accounts, in a single year.

Eligibility to contribute to a Roth IRA is determined by one’s Modified Adjusted Gross Income (MAGI). MAGI is calculated by taking your Adjusted Gross Income (AGI) and adding back certain deductions, such as student loan interest. For the 2025 tax year, single filers with a MAGI below $150,000 can make the full contribution. Eligibility enters a phase-out range for those with a MAGI between $150,000 and $165,000, and they become ineligible with a MAGI of $165,000 or more.

For those who are married and filing a joint tax return, the income limits are higher. In 2025, couples with a MAGI under $236,000 can contribute the maximum amount to their Roth IRAs. The phase-out range for joint filers is between $236,000 and $246,000, with contributions being completely disallowed for those with a MAGI exceeding $246,000.

Major Legislative Updates from the SECURE 2.0 Act

The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022 introduced provisions that expand how Roth accounts can be funded within employer-sponsored retirement plans. Employers now have the option to make matching or nonelective contributions to a plan, such as a 401(k), on a Roth basis. This allows employees to receive these funds as after-tax Roth contributions, provided they are fully vested when made.

Beginning in 2026, employees age 50 or older who earned more than $145,000 in the prior calendar year from their employer must make their catch-up contributions to their workplace retirement plan as Roth contributions. The IRS has delayed enforcement of this provision until January 1, 2026, to give plan administrators time to implement the necessary systems. This rule ensures these additional contributions are made with after-tax money, allowing for tax-free withdrawals in retirement.

The legislation also expanded Roth availability to small business retirement plans. Effective for plan years after December 31, 2022, the law permits creating Roth versions of Savings Incentive Match Plan for Employees (SIMPLE) IRAs and Simplified Employee Pension (SEP) IRAs. This provision allows participants in these plans to designate contributions as Roth, providing more flexibility for tax planning.

The act also allows for rollovers from qualified 529 college savings plans to Roth IRAs. This provision allows beneficiaries of 529 plans to move funds to a Roth IRA tax-free, subject to several conditions. The 529 account must have been maintained for at least 15 years, and contributions made within the last five years are ineligible for rollover. The amount rolled over is subject to the annual Roth IRA contribution limit and there is a lifetime maximum of $35,000 per beneficiary.

Elimination of Required Minimum Distributions for Roth 401(k)s

The SECURE 2.0 Act aligned the rules for Roth 401(k)s with those of Roth IRAs concerning lifetime distributions. Previously, Roth accounts within employer-sponsored plans like 401(k)s were subject to Required Minimum Distributions (RMDs) once the account holder reached a certain age. This created an inconsistency, and many retirees would roll over their Roth 401(k) assets into a Roth IRA to avoid these mandatory withdrawals.

Effective for tax years after December 31, 2023, the SECURE 2.0 Act eliminated the pre-death RMD requirement for Roth accounts in employer retirement plans. This change means individuals are no longer forced to take distributions from their Roth 401(k)s during their lifetime. The funds can remain invested and continue to grow tax-free for a longer period, simplifying retirement planning.

New Rules for Inherited Roth IRAs

The original SECURE Act of 2019 altered the distribution rules for most beneficiaries who inherit a Roth IRA. The law established a “10-year rule” for most non-spouse beneficiaries of accounts whose owners passed away after December 31, 2019. This rule mandates that the beneficiary must withdraw the entire balance of the inherited Roth IRA by the end of the tenth calendar year following the year of the original owner’s death.

This 10-year timeline replaced the previous “stretch” provision, which had allowed beneficiaries to take distributions over their own life expectancy. The rule applies to Designated Beneficiaries, which includes most adult children or other non-spouse relatives. Because Roth IRA distributions are tax-free, the primary impact of this rule is on the timing of the withdrawals.

The law created an exception for “Eligible Designated Beneficiaries” (EDBs). This category includes:

• The surviving spouse of the account owner
• Minor children of the owner, until they reach age 21
• Disabled or chronically ill individuals
• Beneficiaries who are not more than 10 years younger than the deceased account owner

EDBs are exempt from the 10-year rule and can use the life expectancy method to stretch distributions from the inherited Roth IRA. A surviving spouse who is an EDB has the most flexibility, as they can treat the inherited Roth IRA as their own and are not required to take distributions during their lifetime. Other EDBs must begin taking distributions but can do so over their own lifespan, preserving the tax-free growth potential for a longer period.