The IRS is back in action after the end of the government shutdown, and it has begun making changes in full swing. The Internal Revenue Service announced changes to the 401(k) contribution limits for 2026, moving the maximum up to $24,500. This change to the 2026 retirement contribution limits will enable employees to allocate more funds to their savings and plan more effectively for their futures. With concerns around social security and uncertainties regarding the ease of retirement swirling around, the IRS’ new 401(k) plan limits offer a clear avenue for long-term planning for individuals who have some available income to invest in their future.
The 401(k) contribution limits set by the IRS for 2026 will define how much employers and employees can add to the savings account next year. (Image: Freepik)
IRS Increases 401(k) Contribution Limits for 2026: Here’s What Employers and Employees Need to Know
Over the years, 401(k) plans have grown to be the go-to saving strategy for many workers, both due to their simplicity and the reliance on collaboration between employers and employees on these plans. Many employees chose to fall back on the 401(k) plan as their primary method of saving, and as such, it’s important to keep track of the IRS’ 401(k) plan limits to get a better sense of how to plan your savings for the coming year.
The IRS regularly reviews the contribution limits for 401(k) plans each year and occasionally makes adjustments to account for inflation and other regulatory changes that might be necessary. As the IRS increases the 401(k) cap for 2026 by $1,000 to $24,500, there are other guidelines for catch-up contributions that also need to be addressed.
Breaking Down the 2026 Retirement Contribution Limits
The $24,500 basic employee contribution limit for the 401(k) in 2026 is only one part of the guideline. This contribution limit also holds true for other savings plans such as the 403(b) plan, Thrift Savings Plan, and the governmental 457 plans. Those with multiple 401(k) accounts also need to note that the total contribution to all of them together cannot extend beyond the $24,500 limit that has been set. Contributions to other retirement accounts, however, don’t affect the 401(k) contribution limit.
For individuals aged 50 and above, the 401(k) contribution limits for 2026 are slightly higher, allowing them to “catch up” with their desired retirement savings. Workers above 50 are eligible for a catch-up contribution of $8,000 in 2026, allowing them to contribute up to $32,500 each year. For those aged between 60 and 63, the higher catch-up contribution limit remains unchanged at $11,250, setting their individual contribution limit at $35,750.
The Employer’s Role in the IRS 401(K) Plan Limits
Some employers offer to match employee contributions to their 401(k) plans, while others make elective contributions to help them along in their savings journey. While the 401(k) contribution limits for 2026 stand at $24,500, the limit for the total contribution between employers and employees is set at $72,000.
For employees about 50 who may make catch-up contributions, the limit is set at $80,000 for employers and employees together. Individuals who are 60, 61, 62, or 63 get a higher combined limit of $83,250. Employers are free to negotiate the terms of their contributions with employees to settle on a deal where they make their own additions to the employee’s 401(k).
The 401(k) Plan Offers a Great Opportunity for Collaboration Between Employers and Employees
As the IRS increases the 401(k) cap for 2026, employers have an opportunity to review the changes and communicate them with employees as a gesture of goodwill towards their financial well-being. Many employees have expressed fears surrounding the possibility that they may never be able to retire, and this has put a considerable strain on their future plans. Many also continue to have a limited understanding of the financial planning tools that are best suited for them and low awareness regarding the benefits offered by employers.
Now is the time to not only help them access financial education, but also inform them of the IRS’s annual cost-of-living adjustment and the modest increases to the 401(k) contribution limits for the upcoming year. The benefits of retention and eager engagement are obvious advantages of this support, but it can also help employees feel more stable during a period where the state of employment has left them otherwise shaken.
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