American workers will gain the ability to bolster their pension pots significantly in 2026 after the Internal Revenue Service (IRS) announced substantial increases to retirement account contribution limits.
Higher Savings Thresholds Unveiled
In a move that will empower millions to accelerate their wealth building, the IRS confirmed on Thursday that the standard annual limit for 401(k) contributions will rise to $24,500 in 2026. This represents a considerable $1,000 increase from the $23,500 cap set for 2025.
This enhanced limit applies universally to several key workplace retirement plans, including 401(k)s, 403(b)s, the majority of 457 plans, and the federal Thrift Savings Plan. The adjustment provides a significant opportunity for employees to grow their savings in a tax-advantaged environment.
Enhanced Opportunities for Older Savers
The IRS has also delivered positive news for those nearing retirement age. The catch-up contribution limit for savers aged 50 and over will be elevated to $8,000 in 2026, up from the $7,500 allowance in 2025.
Furthermore, under the provisions of the Secure 2.0 law, workers between the ages of 60 and 63 are eligible for an even more substantial boost. This group can contribute an extra $11,250 on top of the standard limit. This higher allowance remains steady from the previous year.
When combined, these new thresholds mean that some diligent retirement savers could potentially shelter more than $35,000 in their accounts in 2026, and this is before any employer matching contributions are even factored in.
The Reality of Maximum Contributions
Despite these more generous limits, industry data reveals that only a minority of savers currently max out their accounts. Vanguard's latest How America Saves report, which analysed over 1,400 plans and nearly 5 million participants, found that just 14% of workers contributed the maximum amount to their 401(k) in 2024.
The report also indicated that the typical total savings rate, which includes employer contributions, stands at approximately 12%.
In addition to the 401(k) changes, the IRS has also raised the savings limits for Individual Retirement Accounts (IRAs). The standard IRA contribution limit will increase to $7,500 next year, up from $7,000. The IRA catch-up limit for those aged 50 and over will also see a rise, moving to $1,100.
Income thresholds used to determine eligibility for deducting traditional IRA contributions and for making Roth IRA contributions are also set to climb in 2026, allowing more individuals to benefit from these tax-efficient savings vehicles.
The announcement from the IRS, led by acting chief Scott Bessent, came just hours after President Donald Trump signed a funding bill to conclude the longest government shutdown in American history. These new retirement rules are part of a broader set of inflation-related tax adjustments for 2026 released by the agency.
