401(k) changes to know for 2026

A New Year brings a renewed focus on finances for many, and if you’re looking to maximize your retirement investments, it might be time to look at your 401(k) contribution limits.

Inflation is influencing how much savers can benefit from catch-up contributions by redefining who qualifies as a “high earner,” said Brandy Marion, retirement plans education manager at BOK Financial®. The Consumer Price Index (CPI) rose 3% year-over-year in September, largely driven be higher gas prices.

The good news is that much of this redefinition already has occurred. “There were a lot of changes made last year to contribution limits, but this year, since inflation is staying a little steadier, there is only one major change beyond what we’ve seen,” Marion said.

Beginning in 2026, if a retirement plan participant who is 50 or older earned more than $150,000 in FICA wages from their employer in the prior year and elects to make any catch-up contributions, those “higher earner” catch-up contributions will need to be made on a Roth (after-tax) basis.

“If the plan does not have a Roth option, they cannot make a catch-up contribution,” Marion said. Marion said that participants will need to talk to their HR or payroll provider to see if they will need to take action or if the provider will automatically change the contribution type to Roth once they exceed the $24,500 limit.

As of 2024, approximately 10.01% of U.S. individual earners made more than $150,000 per year, placing them in the top 10% to 5% of income earners.

For most people, only the contribution limits set by the IRS for employees with access to 401(k), 403(b) and other tax-advantaged employer savings plans will come into play. Here are the details:

• The contribution limit for 2026 is $24,500 for individuals, whether using pre-tax or Roth contributions.
• Individuals aged 50 and older with 401(k), 403(b), most 457 plans or the federal Thrift Savings Plan can contribute up to $32,500 in 2025. This includes a catch-up contribution of $8,000, up from $7,500. For those aged 64 and above, the catch-up amount contribution amount is the same as for those aged 50-plus: $8,000.
• Individuals aged 60 to 63 (by the end of the year) can contribute up to $35,750, including an enhanced catch-up contribution of $11,250, higher than the standard $8,000.

The ins and outs of employer savings plans
For individuals with access to 401(k), 403(b) and other tax-advantaged employer savings plans, it's crucial to understand that contributions to these accounts are tax-deferred. This means you can deduct them from your taxable income in the year they are made, according to Marion. Additionally, any investment growth or earnings within the account can grow tax-deferred, meaning you won't have to pay ordinary income tax until you make withdrawals, ideally during retirement.

Moreover, if your employer offers a Roth 401(k) option, these contributions are taxed upfront, allowing any earnings to be withdrawn tax-free in retirement, provided the withdrawal meets qualified distribution requirements. This can be a beneficial strategy for those who anticipate being in a higher tax bracket in retirement.

Increasing your pre-tax 401(k) contributions will also reduce your taxable income, which means that the more your contributions increase, the less you’re taxed on the remainder. For example, if your pre-tax paycheck is $2,000 and you allocate 10% to your 401(k), you’ll only be taxed on $1,800. Even a 1% increase in your contribution rate can make a difference in the long run, according to Marion.

She suggests reviewing your 401(k) goals regularly to ensure that you’re making progress toward retirement goals as your needs change—and to utilize any employer-matching.

“Even if you’re not maximizing your contributions, if your employer offers to match a percentage, you should contribute enough to earn the match,” she said. “By not taking advantage of this benefit, you are missing out on ‘free money.’”