IRS has announced higher contribution limits for retirement plans in 2026, allowing Americans to save more in tax-advantaged accounts like 401(k)s and individual retirement accounts (IRAs).
These annual adjustments help account for inflation, making it easier for workers to shelter income and grow their retirement savings.
What is the new limit?
Employees with 401(k), 403(b), 457 plans, and participants in the federal Thrift Savings Plan can contribute up to $24,500 in 2026, up from $23,500 this year.
Workers aged 50 and older can make additional “catch-up” contributions, which will rise to $8,000 next year from $7,500 in 2025.
For older savers aged 60 to 63, catch-up contributions remain at $11,250 under the Secure 2.0 rules, in addition to the standard 401(k) limit.
These increases aim to help those closer to retirement accelerate their savings. Annual contributions to IRAs will rise to $7,500 in 2026, up from $7,000 in 2025.
For individuals 50 and older, the IRA catch-up contribution will increase to $1,100, a $100 increase from this year. IRS also updated Roth IRA income limits as part of the 2026 inflation adjustments.
These increases in contribution limits give Americans a better chance to improve retirement savings, especially for those 50 and older.
IRS announcement comes shortly after President Donald Trump signed a funding bill ending the longest federal government shutdown in US history.
About a month earlier, the IRS released several inflation adjustments for 2026, including updates to federal income tax brackets, capital gains thresholds, and provisions affecting families.
Americans and retirement planning
Even with higher contribution limits, many Americans feel unprepared for retirement. According to Vanguard research, only about 40% of workers believe they are on track to maintain their current lifestyle after retiring.
A Goldman Sachs report found that 42% of working Americans, from Gen Z through Gen X, have no disposable income left after covering basic expenses.
With so many households financially stretched, most workers cannot take full advantage of tax-advantaged retirement plans. In 2024, only 14% of Americans contributed the maximum amount to their 401(k)s, with this group largely consisting of older, higher-income earners.
Vanguard’s 2025 How America Saves report analysed over 1,400 plans with nearly 5 million participants, finding the average combined savings rate, including employer contributions, was around 12%.
A separate Fidelity analysis of over 25,000 corporate plans and 24.6 million participants reported a slightly higher combined savings rate of 14.2% in the second quarter of 2025.