Retirement savers will soon have more room to boost their long-term financial security. Beginning in 2026, the IRS will increase contribution limits for both employer-sponsored retirement plans and Individual Retirement Accounts (IRAs). These adjustments are designed to keep pace with inflation and help individuals save more effectively for their future
Higher 401(k) Contributions Limit
In 2026, the annual employee contribution limit for 401(k), 403(b), and most 457 plans will rise to $24,500, up from current levels. This increase allows workers to set aside more pre-tax or Roth retirement dollars through their employer, enhancing both tax efficiency and long-term growth potential.
For employees maximizing their contributions, this change represents a meaningful opportunity to strengthen retirement readiness. Even those contributing smaller amounts may want to revisit their savings strategy to take advantage of the higher ceiling.
IRA Contribution Limit is Also Increasing
The annual contribution limit for traditional and Roth IRAs will increase to $7,500 in 2026. While IRA limits remain lower than those for employer-sponsored accounts, they offer valuable flexibility for individuals who save outside a workplace plan or who want to supplement their 401(k) savings.
Depending on income level and account type, contributions may be tax-deductible or eligible for tax-free growth, making IRAs a critical part of a balanced retirement plan.
Considerations for Savers
These upcoming changes present opportunities for both early planners and those looking to catch up:
– More tax-advantaged savings potential: Higher limits mean greater ability to reduce taxable income or increase tax-free Roth savings.
– Better planning for inflation and longevity: As people live longer, lifting contribution caps helps savers better prepare for extended retirements.
– Opportunities to revisit savings strategy: Individuals may want to adjust automatic payroll contributions, increase IRA funding, or reassess their overall retirement projections.
– Catch-up contributions remain important: While not part of this change, savers age 50 and older should remember that catch-up contributions can further increase what they’re allowed to set aside.
Looking Ahead
As 2026 approaches, individuals and employers alike may benefit from reviewing their retirement strategies to ensure they’re aligned with the new contribution limits. Taking advantage of these increases can help savers build stronger financial foundations and move closer to their long-term retirement goals.