In a significant update to retirement savings, the Internal Revenue Service (IRS) has announced that the catch-up contribution limit for 401(k) plans will increase to $8,000 in 2026, up from $7,500 in 2025 for individuals aged 50 and older. This change is part of a broader effort to help those nearing retirement build their savings more effectively.
In 2026, eligible participants will be able to contribute up to $24,500 annually to their 401(k) plans, a rise from the previous limit of $23,500 for 2025. Additionally, individuals who are 50 and older will have the opportunity to add significant savings, bringing their total contribution capability to $32,500 per year when including the catch-up contributions.
Furthermore, for those aged 60 to 63, the contribution limits are even higher, potentially allowing for total contributions of up to $35,750. These contributors can set aside an additional $11,250 each year, an increase from $10,250 in 2025, showcasing the IRS’s commitment to accommodating the financial needs of those approaching retirement.
This enhancement in savings capacity is part of the SECURE 2.0 Act, which was enacted in late 2022 to provide more flexible options for retirement savings. However, a new requirement beginning in 2026 mandates that high-income earners (those making over $145,000 in the prior year) will need to make catch-up contributions into Roth accounts, which utilize after-tax dollars. This means that only those earning $145,000 or less will escape the Roth contribution obligation.
Experts note that the majority of 401(k) plans already offer a Roth option, and any plans that do not will be required to implement one by 2026. Additionally, the IRA contribution limits will also see a boost; the annual limit will increase by $500 to reach $7,500 in 2026, while the catch-up contribution limit for those aged 50 and older will rise to $1,100.
These updates present a positive opportunity for many employees, particularly those nearing retirement, enabling them to enhance their financial security and take advantage of increased retirement savings options. As the new limits come into effect, they offer hope for a more secure financial future for countless Americans.