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

Americans will be allowed to contribute more of their money to 401(k) and similar retirement saving plans next year.

The IRS said Thursday the maximum contribution that an individual can make in 2026 to a 401(k), 403(b) and most 457 plans will be $24,500. That’s up from $23,500 this year.

People aged 50 and over, who have the option to make additional “catch-up” contributions to 401(k) and similar plans, will be able to contribute up to $8,000 next year, up from $7,500 this year. That’s means a 401(k) saver who is 50 or older will be able to 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 also raised the 2026 annual contribution limits on individual retirement arrangements, or 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.

The changes, among others announced by the IRS, make it easier for retirement savers who use these types of tax-advantaged plans to set aside more of their income toward building their nest egg. That’s especially helpful for older workers who got started saving for retirement later in life and can benefit from higher contribution limits.

Boosting the contribution rate on a 401(k) or IRA plan, even by 1%, can make a big difference over 10 or 20 years, assuming the saver remains employed and making contributions the entire time.

The IRS also increased for 2026 the income ranges for determining whether someone is eligible to make deductible contributions to traditional IRAs, Roth IRAs or to 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. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income, the IRS said.

The IRS has outlined the details on these and other retirement-related changes for 2026 on its site.

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, according to Fidelity Investments.

The increase reflects record-high savings rates and strong stock market gains so far this year.