Workers who have been maxing out their 401(k) contributions just got more room. Starting January 1, 2026, the annual deferral limit for 401(k) plans climbed to $24,500, a $1,000 increase over the 2025 ceiling of $23,500. The IRA contribution cap rose as well, reaching $7,500 after holding at $7,000 for the prior two years.
For someone who maxes out both accounts, that is an extra $1,500 shielded from federal income tax compared to 2025. To put a dollar figure on it: a worker in the 22 percent federal tax bracket would save roughly $330 more in federal taxes this year, with additional savings possible depending on state income tax rates.
The increases were announced by the IRS in a November 2025 newsroom release and formalized in Notice 2025-67. The new caps apply to 401(k), 403(b), governmental 457(b), and Thrift Savings Plan accounts, all effective for the 2026 tax year.
How the limits have grown
The 401(k) deferral ceiling was $19,500 as recently as 2021. A burst of inflation through 2022 and 2023 pushed the limit up in consecutive $500 and $1,000 steps: $20,500 for 2022, $22,500 for 2023, $23,000 for 2024, $23,500 for 2025, and now $24,500 for 2026. That is a 26 percent increase in five years. The IRA limit, which held steady at $6,000 from 2019 through 2022, has followed a similar upward path.
The IRS sets these thresholds using a cost-of-living formula tied to consumer price changes, rounding to the nearest $500 increment. When cumulative inflation clears the rounding threshold between measurement periods, the cap steps up. Both the 401(k) and IRA limits cleared that bar for 2026, as confirmed in the agency’s consolidated COLA table.
SIMPLE IRA and solo 401(k) limits for 2026
Self-employed workers and small-business owners have their own set of caps. For 2026, the SIMPLE IRA employee deferral limit rose to $16,500, up from $16,000 in 2025. The SIMPLE IRA catch-up contribution for workers 50 and older remains $3,500, while those ages 60 to 63 qualify for an enhanced SIMPLE catch-up of $5,250 under SECURE 2.0. These figures are published in the same IRS COLA table referenced above.
Solo 401(k) plans follow the same $24,500 employee deferral limit (plus applicable catch-up amounts) as any other 401(k). On the employer-contribution side, total combined contributions to a solo 401(k) cannot exceed $70,000 for 2026, or $77,500 if the standard catch-up applies. The overall defined-contribution limit, which caps the sum of employee and employer contributions, rose to $70,000 from $70,000 in 2025 per the IRS COLA table. These limits are drawn from the same IRS announcement and Notice 2025-67 that govern the standard 401(k) and IRA caps.
Catch-up contributions get a boost, too
Workers age 50 and older can defer an additional $7,500 on top of the base 401(k) limit in 2026, bringing their total ceiling to $32,000. That catch-up amount is unchanged from 2025.
A newer provision raises the stakes for workers closer to retirement. Under the SECURE 2.0 Act of 2022, participants who are between ages 60 and 63 qualify for an enhanced catch-up contribution. For 2026, that enhanced amount is $11,250, replacing the standard $7,500 catch-up for that age group. So a 61-year-old with a 401(k) could defer as much as $35,750 this year: the $24,500 base plus the $11,250 enhanced catch-up.
For IRAs, the catch-up contribution for savers 50 and older remains $1,000. That figure is set by statute and is not indexed to inflation, so it has stayed flat for years. Combined with the new $7,500 base, eligible IRA savers can put away up to $8,500 in 2026.
Federal payroll systems have already updated
These are not just numbers on a policy notice. The USDA’s National Finance Center, which processes payroll for dozens of federal agencies, issued a bulletin confirming that the TSP elective deferral limit changed to $24,500 effective January 1, 2026. The bulletin also confirmed that the age 60 to 63 enhanced catch-up applies to federal employees enrolled in the Thrift Savings Plan. That operational rollout shows the new limits are live in at least one major payroll infrastructure.
What this means for your paycheck
If you contribute to a traditional 401(k) or traditional IRA, every additional dollar you defer reduces your taxable income for the year. Workers who were already maxing out at $23,500 in their 401(k) can now increase their per-paycheck deferral to reach the new $24,500 ceiling. Most employer payroll systems will accept the higher amount automatically, but it is worth logging into your plan portal or contacting your benefits administrator to confirm your election reflects the 2026 limit.
Roth 401(k) and Roth IRA contributions follow the same caps but work differently on taxes. Because Roth contributions are made with after-tax dollars, raising your deferral will not cut this year’s tax bill. The payoff comes later: qualified withdrawals in retirement are entirely tax-free. The higher limits give Roth savers more room to grow tax-free wealth over time.
IRA savers should keep income limits in mind. The ability to deduct traditional IRA contributions phases out at certain income levels if you or your spouse are covered by a workplace retirement plan. For 2026, the deduction phase-out for single filers covered by a workplace plan runs from $79,000 to $89,000 in modified adjusted gross income; for married couples filing jointly where the contributing spouse has a plan, it runs from $126,000 to $146,000. Roth IRA contributions have their own eligibility thresholds: the phase-out range is $150,000 to $165,000 for single filers and $236,000 to $246,000 for married couples filing jointly. These ranges are published alongside the contribution caps in the IRS’s annual announcement and shifted modestly higher for 2026.
Higher ceilings only help if you can reach them
Bigger contribution limits are most useful to workers who can afford to hit them. According to Vanguard’s How America Saves 2025 report, which analyzed plan data through 2024, the median 401(k) deferral rate was approximately 6.4 percent of pay. For a worker earning the national median wage, that lands well below the old $23,500 cap, let alone the new $24,500 one.
The workers who benefit most from a higher ceiling are typically higher earners who were already bumping against the prior limit. For everyone else, the more consequential factor is often whether their employer offers automatic enrollment or automatic escalation features that nudge contribution rates upward over time. No Treasury Department or Joint Committee on Taxation projection has quantified how much federal revenue the 2026 increase will defer.
Employer matching formulas are also unaffected by the change. The higher deferral cap does not require companies to adjust their match. Workers whose employers match up to a fixed percentage of salary will see no difference on the employer side unless the plan is voluntarily amended.
How to put the new limits to work
Every figure in this article traces to the IRS: the newsroom announcement, Notice 2025-67, and the agency’s standing COLA table. The USDA payroll bulletin independently confirms that the limits have been implemented in a major federal pay system. Workers can treat the $24,500 and $7,500 caps, along with the catch-up figures, as settled for the full 2026 tax year.
The simplest next step is to log into your retirement plan account and check your contribution election. If you were maxing out last year, you now have room to add another $1,000 to your 401(k) and $500 to your IRA. If you were not yet at the limit, the new ceiling is still a useful benchmark: even a small increase in your deferral rate, spread across 26 pay periods, can compound meaningfully over a career. The extra room is there. Whether it fits your budget is the only question left.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
