IRS boosts contribution limits for 401(k) retirement plan savers

Americans Can Increase Contributions to 401(k) and Retirement Plans in 2026

According to the IRS, Americans will have the opportunity to contribute more of their money to 401(k) and similar retirement saving plans next year. The maximum contribution that an individual can make in 2026 to a 401(k), 403(b), and most 457 plans will be $24,500, up from $23,500 this year.

Individuals aged 50 and over, who have the option to make additional “catch-up” contributions to these plans, will be able to contribute up to $8,000 next year, up from $7,500 this year. This means that a 401(k) saver who is 50 or older can contribute a maximum of $32,500 to their retirement plan annually starting in 2026.

Workers between the ages of 60 and 63 will be allowed catch-up retirement plan contributions of up to $11,250 annually, unchanged from this year. The IRS has also raised the 2026 annual contribution limits on individual retirement arrangements (IRAs) to $7,500, up from $7,000 this year. The IRA “catch-up” contribution limit will include an annual cost of living adjustment of $100, increasing it to $1,100 in 2026.

These changes, along with others announced by the IRS, aim to make it easier for retirement savers to set aside more of their income toward building their nest egg. This is especially beneficial for older workers who may have started saving for retirement later in life and can benefit from higher contribution limits.

Increasing the contribution rate on a 401(k) or IRA plan, even by 1%, can make a significant difference over 10 or 20 years, assuming the saver remains employed and makes contributions consistently.

The IRS has also increased the income ranges for determining eligibility to make deductible contributions to traditional IRAs, Roth IRAs, or claim the “saver’s credit,” also known as the retirement savings contributions credit. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions, with deductions potentially phased out based on income and filing status.

The details on these and other retirement-related changes for 2026 can be found on the IRS website.

According to Fidelity Investments, the average balance on a 401(k) account was $137,800 in the second quarter, up 8% from a year earlier and 32% from the same quarter in 2020. This increase reflects record-high savings rates and strong stock market gains so far this year.