978. Laura reviews new IRA rules starting in 2026 that you should know and factor into your retirement planning.
978. Laura reviews new IRA rules starting in 2026 that you should know and factor into your retirement planning.
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As we approach the end of 2025, it’s critical to maximize tax-advantaged retirement accounts to save more and reduce your tax bill. Plus, some big account changes are coming in 2026! This post will review the new rules for retirement savings that start next year.
Welcome back to episode 978 of Money Girl–I appreciate you downloading the show! I'm Laura Adams, an award-winning author, on-camera spokesperson, female money speaker, and founder of The Money Stack, my Substack newsletter. Free subscribers automatically receive my Money Success Toolkit, which includes the exact templates I use to manage my finances.
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7 retirement rule changes for 2026
Most contribution and income limits for retirement accounts are subject to inflation adjustments, also known as cost-of-living adjustments. That’s why the account rules can change from year to year.
The IRS has announced the following seven changes that will affect your 2026 tax return.
1. Higher base contribution limits for workplace plans.
Just about every year, the base contribution limit for workplace retirement plans goes up. So, I wasn’t surprised to see an increase in 2026 for accounts such as 401(k)s, 403(b)s, 457s, and Thrift Savings Plans (TSPs) for federal government workers.
The current contribution limit of $23,500 will increase to $24,500 in 2026. That means you can save more for retirement, take advantage of any additional employer matching, and cut your taxes.
For instance, if you have a traditional retirement plan, your contributions are tax-deductible, reducing your tax liability in the current year. Your future withdrawals of traditional contributions and earnings will be included in your ordinary taxable income. Plus, if you’re under 59.5, withdrawals not subject to an exclusion are subject to an additional 10% early withdrawal penalty.
If you choose a Roth retirement plan, your contributions are non-deductible because you make them on an after-tax basis. However, withdrawals are entirely tax-free once you’re 59.5 and have owned the account for at least five years.
Any early withdrawals of amounts not previously taxed, such as account earnings, are subject to a 10% early withdrawal penalty if you’re under 59.5. However, you can always withdraw your original Roth contributions tax and penalty-free.
2. Higher catch-up contribution limits for workplace plans.
If you participate in a workplace retirement plan–such as a 401(k), 403(b), 457, or TSP– and are over age 50, you can make additional contributions, known as catch-up contributions. The limit has been $7,500 for many years, so I was glad to see that it will increase to $8,000 starting in 2026.
Therefore, those 50 or older with a workplace retirement plan can contribute at least the base rate of $24,500, plus an additional catch-up contribution of $8,000, for a total of $32,500.
However, if you’re in a narrow age range of 60, 61, 62, and 63, you can contribute more than a regular catch-up amount, up to $11,250. In other words, those from 60 to 63 will be able to contribute $24,500, plus a super catch-up contribution of $11,250 (unchanged from 2025), for a total of $35,750 in 2026.
READ ALSO: Am I saving enough for retirement?
3. Higher base contribution limits for IRAs.
Just as the base contribution limit for workplace retirement plans is going up, the limit for traditional and Roth individual retirement accounts (IRAs) will also increase. The current limit of $7,000 will become $7,500 in 2026. However, you must have at least that much earned income to max out an IRA.
With a traditional IRA, your contributions are tax-deductible, reducing your tax liability in the current year. Your future withdrawals of traditional contributions and earnings after age 59.5 will be included in your ordinary taxable income.
If you qualify for a Roth IRA (more about that in a moment), your contributions are non-deductible because you make them on an after-tax basis. However, Roth withdrawals are entirely tax-free once you’re 59.5 and have owned the account for at least five years.
LISTEN ALSO: Who’s eligible for a spousal IRA?
4. Higher catch-up contribution limits for IRAs.
Just like with workplace retirement plans, those over 50 can make additional catch-up contributions to an IRA. While the limit is lower, it’s still good to see a small increase from $1,000 in 2025 to $1,100 in 2026.
Therefore, if you’re over 50 and have qualifying income, you can contribute $7,500 plus $1,100 to an IRA, for a total of $8,600 in 2026. This limit applies to both traditional and Roth IRAs. For example, if you’re over 50, you could contribute $4,000 to a traditional IRA and $4,600 to a Roth IRA to meet the annual maximum.
RELATED: How many retirement accounts can you have?
5. Higher income limits for Roth IRA eligibility.
The Roth IRA is the only retirement account that disallows contributions for high earners. However, the income thresholds for Roth IRA contributions are going up in 2026 as follows by tax filing status:
READ ALSO: Is it better to have a traditional IRA or Roth IRA?
6. Catch-up contributions for high earners must be Roth.
The biggest headline for 2026 is that high earners over age 50 can no longer make traditional, pre-tax catch-up contributions to a workplace retirement plan; they must make after-tax Roth catch-ups instead.
This new rule will affect employees who earned more than $150,000 in wages from their employer in the previous year (2025). Making Roth catch-up contributions means you lose the upfront tax deduction on up to $8,000 for 2026.
Instead, high earners must pay taxes upfront on any catch-up contributions before they are deposited into a Roth account. However, the upside of a Roth is that your withdrawals are tax-free in retirement.
RELATED: Think you’re too rich for a Roth IRA? Think again
7. Self-employed retirement accounts.
If you don’t have an employer that offers a retirement plan or you’re self-employed, you have excellent options, such as a solo 401(k) or a simplified employee pension (SEP) IRA.
A solo 401(k) is for business owners with no employees other than a spouse. You can contribute as both an employer and an employee. It breaks down to $24,500 as an employee plus 25% of net earnings as your own employer. Plus, if you’re over 50, you can make an additional $8,000 catch-up contribution, or a super catch-up of $11,250 from 60 to 63. However, your total contributions can’t exceed $72,000 for 2026, which is up from $70,000 in 2025.
A SEP-IRA can be used for a business of any size, whether you have employees or not. The annual contribution for 2026 is limited to 25% of net earnings, up to $72,000, up from $70,000 in 2025. No catch-up contributions are allowed with a SEP-IRA.
Review your retirement plan
To sum up, your retirement plan shouldn’t be on autopilot for 2026. It’s critical to review your progress and strategy, especially if you’re over 50.
These aren’t the only changes coming to retirement accounts next year. If you have questions, speak with your plan representative or hire a certified financial planner to help you set realistic retirement goals.
If you’re over 50 with employee wages that were over $150,000 for 2025, remember that any 2026 catch-up contributions must be Roth. Contact your benefits administrator to make sure your payroll deduction is set up correctly as of January 1, 2026.
Also, consider boosting your contribution rate to hit the new maximum amounts. Every dollar you invest counts and will increase your future financial security.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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