The Internal Revenue Service (IRS) of the United States announced on Thursday (November 13) that the maximum contribution limit for various employee retirement plans in 2026 will be increased from $23,500 in 2025 to $24,500.
This change applies to 401(k) plans, 403(b) plans, most governmental 457 plans, and the federal Thrift Savings Plan (TSP).
IRS also released the catch-up contribution limits for employees aged 50 and above in 2026, new individual retirement account (IRA) savings limits, and Roth IRA contribution limits.
Starting in 2026, employees aged 50 and over participating in 401(k), 403(b), governmental 457, and TSP plans will see their catch-up contribution limit increase from $7,500 in 2025 to $8,000.
Under the Secure 2.0 Act amendment, investors aged 60 to 63 participating in these plans have a higher catch-up contribution limit, allowing an additional $11,250 contribution, which remains unchanged in 2026 from 2025.
Both of these amounts are separate from the $24,500 maximum contribution limit for 2026.
According to the “2025 U.S. Retirement Savings Status Report” released by Vanguard, by 2024, only 14% of participants had reached the contribution limit for 401(k) plans. The report was based on data from over 1400 eligible plans and nearly 5 million participants.
The report also indicates that the average overall savings rate, including employer contributions, is estimated to be 12%.
Another report shows that the average savings rate for 401(k) plans in the second quarter of 2025, including both employee and employer contributions, is 14.2%, based on an analysis of over 25,000 corporate plans and 24.6 million participants by Fidelity Investments.
Taxpayers may be eligible to deduct contributions to traditional IRAs from taxable income when filing taxes under specific conditions. If either the taxpayer or their spouse participated in a workplace retirement plan during the year, the deduction amount may decrease or be gradually phased out, depending on filing status and income. (If neither the taxpayer nor their spouse participated in a workplace retirement plan, the deduction amount is not subject to gradual phase-out restrictions.) The phase-out ranges for 2026 are as follows:
Participation in a workplace retirement plan affects the deduction for traditional IRAs, a rule set by the IRS to avoid “double tax benefits.” This is because traditional IRAs already provide the benefit of reducing taxable income for contributions in the current year, with investment growth being tax-deferred until withdrawal.
About a month ago, the IRS issued several adjustments for 2026 related to inflation, including federal income tax rates, higher capital gains tax rates, and provisions affecting families.
(References: CNBC, Mint)