2026 Contribution Limits

Speaker 1: (00:00)
Can you contribute to your 401 in 2026? We'll cover that exact thing on today's episode, along with retirement account contribution limits, HSA contribution limits, and more all on today's episode. So stay tuned.

Speaker 1: (00:20)
Hello everyone, and welcome to the Retirement Power Hour. My name is Joe Allaria, and this is episode 42. And once again, today we are going to talk about IRAs, 401 s, simple IRAs, HSAs, Roth IRAs, and possibly even more if I missed a couple. And we're gonna tell you how much you can contribute to each one of these types of accounts, and if you're even eligible to contribute to these accounts. And all of this is to help you set yourself up for retirement, help you put money in the right places. Of course, as you watch this, you might have questions that come up. So I always encourage our listeners and viewers, go to retirementpowerhourpodcast.com. You can click work with me, and you can set up a call with me or a member of our team, and we can talk through your situation and help you put a plan together that fits your needs and your objectives.

Speaker 1: (01:11)
And you can also submit a question if you wanna do it anonymously or just send it in. Again, go to retirementpowerhourpodcast.com, click submit a question, and we can answer that via email or possibly on a future show. So let's talk a little bit about IRAs and Roth IRAs and some of the changes that have happened from 2025 to 2026. In 2025, the contribution limit for both IRAs and Roth IRAs was at $7,000 for individuals under age 50, and it was $8,000 if you were 50 years old or above. And that contribution limit, that has gone up in 2026. So now, the limit is 7,500 if you are under 50 years of age, but it is 8,600 if you are 50 years of age or older. So there was a pretty significant increase from 2025 to 2026. It was $500 and $600 depending on if you are 50 years of age or older.

Speaker 1: (02:13)
And so hopefully that allows you to put a little bit more money away if you are utilizing those vehicles. Keep in mind, those contribution limits for traditional IRAs and Roth IRAs are aggregated. For example, if you're under 50 years of age, you're not allowed to do 7,500 to a Roth IRA and another 7,500 to a traditional IRA. You can mix and match, but the total of contributions to each type of account has to be no greater than $7,500. Now, there are some income restrictions when talking about making Roth IRA contributions or making deductible IRA contributions, deductible traditional IRA contributions. So I wanna talk about that because once again, those limits have gone up. So talking about Roth IRA income phase outs, last year, that phase out range went from 150,000 to 165,000. Now in 2026, you're looking at a range of 153,000 to 168,000. So that is for single tax filers.

Speaker 1: (03:17)
If you are a single tax filer and you make under 153,000, and that's modified adjusted gross income, you're able to make a full contribution to a Roth IRA. However, if you make over 168,000, you can't make any contribution to a Roth IRA. And again, that is for single tax filers. For married couples filing jointly, the income phase out last year was 236,000 to 246,000. Now in 2026, you're looking at 242,000 to 252,000. And that again is the Roth IRA income phase outs for 2026. Those income phase outs vary a bit for traditional IRAs as the amount you can contribute depends on if you have access to an employer-sponsored plan. And we have created a cheat sheet. It will include a link in the show notes below, or if you're viewing this on our website, you can see the resource below on the page and it will tell you exactly how those income phase outs work for traditional IRAs.

Speaker 1: (04:20)
Now, let's shift gears a little bit and talk about 401Ks. So last year, again, 2025, the contribution limit was 23,500. Now in 2026, that's gone up $1,000. So now you can contribute 24,500. That is the employee deferral limit. So that's what you can defer from your paycheck. That is the, the maximum you can defer if you are, again, under 50 years of age. Now, if you qualify for that catch-up, meaning you're 50 years of age to age 59, stay with me because there are some different catch-up provisions for 401 s due to the Secure Act 2.0. It's not just 50 plus, but 50 to 59, you can do an extra $8,000. So that catch-up amount has gone up from 2025. 2025, it was 7,500. Now that is 8,000. Now here's where the kicker comes in. We saw this for 2025. We have it again for 2026 due to the Secure Act 2.0.

Speaker 1: (05:20)
But with people that are 60 to 63, you get something called a super catch-up. So you're under the super catch-up provision, which allows you to do not 8,000, but $11,250. So that super catch-up amount didn't change from 2025, stayed the same. But again, instead of doing 24,500 plus 8,000, if you are in that 60 to 63 range, you could do 24,500 plus 11,250. So the total that anyone could do in a 401 in the form of deferrals, employee deferrals, would be $35,750. And then what if you're 64? What if you're 65 or 66 or 67? How much can you contribute and how much of that catch-up can you use? Do you get to use 11,250? Unfortunately not. And you might be watching and scratching your head thinking, why in the world can I not use the 11,250 if I'm 64, but I can if I'm 63?

Speaker 1: (06:23)
And my answer would be, I have no idea. I, I never understood that part of the law, but that's the way it is. Once you hit 64, you're back to $8,000 for 2026 on that catch-up, which means you could do 24,500 plus 8,000. That gets you to 32,500. Now, the biggest change for 2026 on those catch-up provisions in a 401 and you'll probably see this if you're in this category and if you're taking advantage of the catch-up provision in your 401. In 2026, those catch-up contributions are mandated. They have to go into a Roth account. So again, when I say Roth, first of all, I'm not talking about a Roth IRA. I'm talking about a Roth 401. People confuse the two all the time, but they have to go to a Roth 401. And that's all inside of your 401. Inside your 401 you have pre-tax dollars and potentially you would have Roth dollars.

Speaker 1: (07:21)
And the 401 record keeper is gonna keep track of how much is in each type of account. Your balance may show one big number, but inside of that one big number, you have some pre-tax money and some, potentially some Roth money. And again, that is one of the biggest changes. Any catch-up contributions for 2026 have to go to Roth. Now, is that on you, the employee? No, that's not. That's actually gonna be on the administrator of the 401 to take care of that for you. Many of the providers that we work with, they don't require employees to make that change. This is on the plan itself. So the plan itself needs to make sure that they can execute on that change. So if you are watching this and you happen to be in charge of taking care of 401 s for maybe your company or you help manage it as part of your, your role at your job, be aware that you're gonna run into this in 2026.

Speaker 1: (08:14)
Next, I wanna talk a little bit about simple IRAs. And once again, the rules around SIMPLE IRAs for 2026 are anything but simple. So let's start with your elective deferral limit for SIMPLE IRAs in 2026. If you are under 50 on December 31st, 2026, and your company has 25 or fewer employees, your elective deferral limit is 18,100, $18,100. Now, if your company has over 25 employees, then you can't do 18,100. You can only do $17,000 for 2026. Now, let's go back to the small company example. If your company has 25 or fewer employees and you've got that $18,100 deferral limit, let's say you're 50 or older, now you have a catch-up on top of that of $3,850. So the total amount you could contribute if you are over 50 and your company is 25 or fewer employees is $21,950. And I really need to read this next part because this is where it starts to get complex.

Speaker 1: (09:22)
If you are between 50 and 59 or 64 or older on December 31st, 2026, and your company has more than 25 employees and the company makes higher than the usual company contribution, then those same limits apply, if you followed all of that. Now, if you're between 50 and 59 or 64 or older at the end of 2026 and your company has more than 25 employees and it doesn't make the increased company contribution, your total deferral maximum is $21,000, which is 17,000 for your deferral limit and a $4,000 catch-up. And you may notice that the 2026 age 50 and older catch-up limit for smaller employers and larger employers who make the higher company contribution is $3,850. It's lower than the $4,000 that the 50 and older catch-up for larger employers are allowed to do. So I don't think this was intended by Congress for that difference, 3,850 to $4,000.

Speaker 1: (10:22)
Hopefully Congress will fix this in future years. And if you're between ages 60 and 63 at the end of 2026, and if your plan allows it, you can defer up to a total of 23,350 or 22,250, including those regular deferrals of 18,100 or 17,000, de- depending on what we talked about earlier, and that $5,250 catch-up, that super catch-up for those 60 to 63. And as I stated on last year's episode, if you have any questions about how much you can contribute to your simple IRA, which ironically is the most convoluted retirement account out there with these new rules, even though it's a simple IRA, give us a call or schedule a time to chat with us on our website and we'll be happy to walk you through the complex flow chart that you need to work through to figure out how much you can contribute to your simple IRA.

Speaker 1: (11:18)
Next, let's talk about the standard deductions for 2026. If you are a single tax filer, the standard deduction has gone up to 16,100, which is up from 15,000 in 2025. For married couple filing jointly, standard deduction's gonna be twice that, $32,200, which again is up from 30,000 in 2025. If you are 65 or older, you're gonna get an additional deduction on top of that standard deduction, which is gonna be equal to $1,650 per person for those married filing jointly. For those single filers out there, you get an additional $2,050 on top of your standard deduction if you are over 65 and single. Now, due to tax legislation that was passed in 2025, the big beautiful tax bill, there is an additional deduction that you could be eligible for if you are 65 or older, and it's called the enhanced senior deduction. And what it is, is you could get another $6,000 in a deduction per person for a total of 12 if you're a married couple filing jointly.

Speaker 1: (12:25)
Now, that enhanced senior deduction is phased out with certain income limits. So if you're a single filer, that enhanced deduction begins to phase out at $75,000. And for married couples filing jointly, the enhanced deduction phases out starting at $150,000. So when you start adding up all of these potential deductions, you know, standard deduction over 65, enhanced senior deduction, really, you may see it on your 2025 tax return. I think some people will be probably pleasantly surprised with how much they maybe got back in a refund for 2025, but that will continue in 2026 as long as you, again, are under the income phase outs for the enhanced senior deduction. But either way, across the board, standard deductions have gone up in 2026. And last but not least, marginal tax brackets. Again, due to the big beautiful tax bill passed in 2025, all of the marginal tax brackets more or less stayed the same.

Speaker 1: (13:24)
We still have the same seven marginal tax brackets. Now, the ranges varied from 2025 to 2026 due to inflationary increases. So for all intents and purposes, those marginal tax brackets stayed the same other than for those inflationary increases. We can be thankful for that. Tax rates were going to be higher, and now due to the big beautiful tax bill, that bill extended those lower marginal tax rates. So hopefully we all get good news on our tax returns for 2025, but those are all of the changes, at least that we're gonna cover on this show, but the retirement contribution changes, some of the other limits that have changed. Once again, and lastly, if you have any questions, go to retirementpowerhourpodcast.com. Maybe you're completely clear on how much you can contribute, but you wanna take a look at how much you need to contribute, and if you're on track to retire on time when you'd like to retire.

Speaker 1: (14:17)
If so, go to retirementpowerhourpodcast.com, click work with me, schedule a call, and we'll give you a complimentary analysis. So it will take you through the entire process, create a financial plan, tell you how much you need to be saving, when you can retire, maybe you're close to retirement and you'd like to retire soon. Well, we'll give you our opinion on if that's a safe thing to do or not. We'll also review your investment portfolio and any tax strategies or tax planning that, that you could possibly implement to save taxes either today or in the future. So if that's you, take advantage of that. But with that, I appreciate you watching and tuning in to this episode of the Retirement Power Hour, where we help listeners invest wiser and retire better. We look forward to seeing you again next time. Take care.

Speaker 2: (15:03)
Thank you for listening to the Retirement Power Hour Podcast. All material discussed on this podcast is for educational purposes only and should not be construed as individual tax, legal, or investment advice. Investing involves risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results. Joe Allaria is an investment advisor representative of Carson Allaria Wealth Management, a registered investment advisory firm. Information discussed on this podcast may be derived from third parties that are believed to be reliable, but Carson Allaria Wealth Management does not control or guarantee the accuracy or timeliness of such information and disclaims all liability for damages resulting from such sources. Any references to third parties are provided as a convenience and do not constitute an endorsement.