The rules for these employer-sponsored retirement plans have again been adjusted slightly to reflect inflation.
Can I save money using both a 401k and a traditional IRA at the same time?
Simply Money Minute’s Amy Wagner gives advice on how to save for retirement.
Allworth Financial, Cincinnati Enquirer
You may think you already know everything there is to know about how a 401(k) works. After all, the premise of such an account is quite simple. You choose to contribute a percentage of each paycheck, and that money is invested in a fund of your choice. You can write off your contributions for the year you file your tax return (unless you use a Roth account), and your money will grow tax-free until you withdraw it, perhaps in retirement.
These basics remain the same from year to year, but other rules may change from year to year. Here are three of the most important updates coming to employees in 2026.
1. Increase in contribution limits
The government reviews 401(k) contribution limits annually to decide whether to increase them, and they are expected to increase next year. The limit depends on your age at the end of 2026. Here’s how your 401(k) limits will compare in 2025 and 2026:
Source: IRS.
The additional $8,000 that individuals aged 50 to 59 or 64 and older can save and the additional $11,250 that individuals aged 60 to 63 can save are known as catch-up contributions. These are intended to help workers make up for lost time who may not have saved enough for retirement when they were younger.
These limits apply to your combined traditional and Roth 401(k) contributions for the year. So, for example, if you’re under 50 and contribute $14,500 to a traditional 401(k) next year, you can only put up to $10,000 into a Roth 401(k).
These limits are higher than most workers can reach. But high-income earners will appreciate the opportunity to stash more money in tax-advantaged investment accounts. If you plan to max out your account, calculate what percentage of your salary you need to contribute by dividing the applicable limit by the number of pay periods in 2026. Then, check back from time to time throughout the year to make sure you haven’t accidentally exceeded your annual contribution limit.
2. Increase in the annual addition limit
The government also sets annual additional limits that dictate the maximum total amount you and your employer can contribute to your 401(k). $70,000 in 2025, increasing to $72,000 in 2026. So, for example, if you’re under 50 and max out your 401(k) next year, your employer can only contribute up to $47,500 on your behalf.
Older workers should note that catch-up contributions do not count towards the annual additional limit. So, if you’re between 50 and 59, your actual annual additional limit is $80,000 after factoring in your $8,000 catch-up contribution in 2026.
3. Change in annual compensation limit
The annual compensation limit determines the amount of annual compensation that an employer takes into account when calculating the maximum 401(k) match. In 2025, the limit is $350,000 and increases to $360,000 in 2026. This could allow high-income earners to collect an even larger 401(k) match in 2026.
Check with your employer for additional changes to your plan
The changes described above are being made at the federal level and apply to all 401(k) plans, but additional changes may be made to plans. For example, the Company may adopt, discontinue, or modify its 401(k) matching program. Or they may start offering a different set of investment options.
Your employer must notify you if these changes occur. Take the time to understand the implications and make any necessary adjustments, such as increasing your contributions or choosing new investment options, to stay on track to reach your retirement goals.
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