What the 2026 401(k) Changes Mean for Your Retirement Planning

What the 2026 401(k) Changes Mean for Your Retirement Planning

By Cody Allen, CSRP
President 

Tax rules around retirement-plans adjust for inflation and new legislation each year. For 2026, several key changes to contribution limits for employer-sponsored retirement plans (including 401(k)s) present a meaningful opportunity for investors.

The Big Picture: Higher Limits = More Savings Power

• The elective deferral limit for most 401(k)/403(b)/457(b) plans will rise to $24,500, up from $23,500 in 2025.
• For employees aged 50 and older, the “standard” catch-up contribution amount increases as well: from $7,500 in 2025 to $8,000 in 2026.
• What this means: if you’re under 50, you can defer up to $24,500; if you’re 50+ you can defer up to $24,500 + $8,000 = $32,500.
• Another unique opportunity to sock money away into a retirement plan for soon-to-be retirees is the “super catch-up” contribution. Individuals between ages 60-63 can increase their catch-up contribution from $8,000 to $11,250.

That extra savings may seem modest ($1,000 more than 2025), but compound growth and tax-deferral mean even small increases today can make a big difference by retirement.

Why the Change (and What to Watch)

• Inflation & cost-of-living adjustments – These increases are largely driven by inflation indexing, kicking the limits upward to maintain the “real” value of tax-advantaged savings.
• The impact of the SECURE 2.0 Act – Among the new features: for 2026, if you’re 50+ and your prior-year wages from a given employer exceed a certain threshold (about $150,000), your catch-up contributions may be required to be designated as Roth (after-tax) rather than pre-tax.
• Employer/plan design implications – While you can defer more, your employer’s plan must support doing so; plan rules, matching formulas, vesting and whether Roth electives are available all matter. If your plan doesn’t offer Roth catch-ups and you’re required to make them Roth under the new rule, you may need to act or consider plan alternatives.
• Strategic planning opportunity – With a small increase in limit, now is a strong time to revisit the plan and ask: Should I increase my deferral rate? Is this the year to maximize saving? Do I need to convert more to Roth now to hedge future tax rates?

What You Should Do Now

• Review your budget and the new limit. If you were contributing near the 2025 maximum, consider shifting to reach the 2026 level.
• Check your employer’s 401(k) plan design. Confirm that your plan allows the 2026 limits and whether it includes Roth deferral options and catch-up provisions. If you are age 50+ and your wages exceed the threshold, check whether catch-up contributions must be Roth.
• Evaluate tax strategy. Pre-tax contributions still reduce your taxable income now, but Roth contributions offer tax-free growth and withdrawals later. With the new Roth-catch-up requirement for higher earners, you may want to assess whether a partial Roth conversion or increased Roth contributions make sense.
• Consider employer match. Don’t neglect to capture full employer matching. Even with a higher deferral limit, unmatched contributions are lost opportunity.
• Revisit your retirement timeline and asset allocation. More savings now enable more flexibility later. With potential Social Security uncertainty and longer lifespans, stacking on the extra savings can build resilience.
• Communicate with your plan administrator / payroll team. Confirm changes to contribution limits are implemented correctly, that your deferral election reflects your desired amount, and that administrative systems are updated for 2026.
• Plan for “what-if” scenarios. Example: If you switch jobs mid-year, contributions may roll or be transferred; if you hit the limit in one plan you can’t exceed it across plans; if you’re self-employed you may have additional vehicle choices (e.g., solo 401(k)). (Note: the total combined employer + employee contribution limit for defined contribution plans also increases to $72,000 in 2026.

Bottom Line

The 2026 changes to 401(k) and similar retirement plan contribution limits represent a clear opportunity. The increase in elective deferral limits, combined with strategic use of catch-up contributions and thoughtful tax elections, can significantly enhance your retirement savings trajectory.

That said, the benefits depend on executing the plan: ensuring your plan allows the contributions, aligning your tax strategy, and calibrating saving to your long-term goals. The extra $1,000 or more may not feel dramatic—but over decades of compounding, it can meaningfully widen your margin for error and increase retirement readiness.

If you’d like to review your 401(k) deferral rate, examine your plan’s provisions (especially if you’ll turn 50 soon or exceed the higher-earner threshold), or explore Roth vs. pre-tax scenarios, please contact your Tower Trust advisor. Let us help you make the most of the 2026 rules—not just by saving more, but by saving smarter.