Navigating the 2026 Retirement Landscape: New Contribution and Income Limits

As we move into 2026, the IRS has released the updated cost-of-living adjustments for retirement accounts. I often tell my clients that these updates are the “annual physical” for their portfolio, a critical moment to diagnose issues and ensure everything is on track.

Staying ahead of these changes helps allow you to maximize your tax-advantaged savings and ensure your long-term plan remains on track.

Here is a breakdown of what has changed from 2025 to 2026.

1. Traditional and Roth IRA Contributions

The annual contribution limit for IRAs (both Traditional and Roth) has seen a modest increase for 2026 to keep pace with inflation.

Note: Total contributions to all your IRAs (Traditional and Roth combined) cannot exceed these limits.

2. 401(k), 403(b), and 457 Plans

For those utilizing employer-sponsored plans, the 2026 limits provide a significant opportunity for high earners to shield more income from immediate taxation.

• Employee elective deferral: $24,000 for 2026 (up from $23,500 in 2025)
• Catch-up contribution (Age 50+): $7,500, bringing the total possible contribution to $31,500
• Total defined contribution limit: $72,000 (employee + employer contributions)

Source: U.S. Department of the Treasury – Pension Plan Limitations

3. 2026 Roth IRA Income Phase-Out Limits

Perhaps the most important numbers for high-income earners are the phase-out ranges. If your Modified Adjusted Gross Income (MAGI) exceeds these levels, your ability to contribute directly to a Roth IRA is reduced or eliminated.

4. Traditional IRA Deduction Phase-Outs

If you (or your spouse) are covered by a retirement plan at work, your ability to deduct Traditional IRA contributions is also subject to income limits:

• Single / Head of Household: $79,000 to $89,000
• Married Filing Jointly (Active Participant): $126,000 to $146,000
• Married Filing Jointly (One spouse covered): $236,000 to $246,000

Source: Social Security Administration (SSA) – National Average Wage Index Updates

Strategic Takeaways for 2026

• Automate the increase: If you currently max out your 401(k), remember to update your payroll deferral to hit the new $24,000 target.
• Evaluate the “Backdoor” Roth: If your income has climbed into the phase-out ranges mentioned above, let’s discuss whether a Backdoor Roth IRA strategy remains appropriate for you.
• Review beneficiaries: With every new year, it’s wise to ensure your account beneficiaries are up to date alongside your contribution adjustments.

Important Note

These are not formal recommendations. Always consult with a qualified financial advisor or tax professional before making changes to your retirement strategy.

Speak With a Trusted Advisor

If you have any questions about your investment portfolio, retirement planning, tax strategies, our 401(k) recommendation service, or other general questions, please give our office a call at (586) 226-2100. Please feel free to forward this commentary to a friend, family member, or co-worker.

If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.

We hope you learned something today. If you have any feedback or suggestions, we would love to hear them.

Best Regards,

James Baldwin

Disclaimer: This information is for educational purposes only and does not constitute specific tax or legal advice. Always consult with a qualified financial advisor or tax professional before making changes to your retirement strategy.