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Anyone can be forgiven if they don’t associate the IRS with good news, but thanks to some provisions in SECURE 2.0 Act of 2022 (SECURE 2.0), the tax-collecting agency delivered some good news on Thursday, Nov. 13 and quite a bit of it at that.
The good tidings from the IRS are particularly meaningful on the retirement savings front. Notably, the 2026 contribution limit on employer-sponsored retirement plans, including 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan, will rise to $24,500 from $23,500 this year.
For workers that don’t have access to employer-sponsored and self-employed folks that depend on individual retirement accounts (IRAs), there’s good news, too.
“The limit on annual contributions to an IRA is increased to $7,500 from $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment is increased to $1,100, up from $1,000 for 2025,” according to the IRS.
2026 a Good Time to Catch Up
For those that have procrastinated on retirement planning and not contributed as much to retirement plans as they should have in past years, now is the time to ameliorate that situation. Starting today can serve as a foundation, though not mandatory, for accessing some other IRS “goodies” next year.
“The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $8,000, up from $7,500 for 2025. Therefore, participants in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan who are 50 and older generally can contribute up to $32,500 each year, starting in 2026,” adds the agency. “Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2026, this higher catch-up contribution limit remains $11,250 instead of the $8,000 noted above.”
Nothing beats getting started on retirement saving when one is presumably entering the workforce in their 20s, but that’s not the reality of all workers. In lieu of a time machine that no one possesses, catch-up provisions, particularly when they’re rising, are meaningful.
Did Someone Say Deductions?
Undoubtedly, tax credits are more enticing, but deductions aren’t half bad, either, and SECURE 2.0 has some new deduction thresholds that are meaningful to retirement savers and this is an area in which advisors can add value because some of the stipulations are sort of wonky and depend on a client’s marital status.
“For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $81,000 and $91,000, up from between $79,000 and $89,000 for 2025,” notes the IRS. “For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $129,000 and $149,000, up from between $126,000 and $146,000 for 2025.”
For a worker that isn’t covered by a workplace plan and is allocating to an IRA but is married to someone that is covered by an employer-sponsored offering, the 2026 phase-out moves to $242,000 and $252,000, up $6,000 on both ends from 2025.
Advisors should also tell married clients that file separately that there is no cost of living adjustment if the filer is covered by a workplace retirement plan.