2026 Retirement Contribution Limits: What New Tax Laws Mean for You

Tax-Advantaged Retirement Plans: What Every Taxpayer Should Do Now

For many of you retirement may feel like a distant milestone, but the decisions you make today can have a profound impact on your financial security tomorrow. With recent legislative changes continuing to take effect into 2026, you should understand how these changes impact tax planning and long-term wealth accumulation.

When it comes to building long-term wealth, how you save is just as important as how much you save. Tax-advantaged retirement accounts such as 401(k)s, IRAs, and SEPs offer powerful opportunities to grow your investments while reducing the impact of taxes over time. Tax law changes continue to roll out new provisions that affect how you save and invest in retirement accounts. Now is a good time to review your retirement savings plan and make changes to maximize your tax savings and keep the plan aligned with your goals.

What Opportunities Exist Through My Employer?

Employer-sponsored plans such as 401(k)s and 403(b)s allow taxpayers to make contributions on a pre-tax basis, saving the taxpayer tax dollars while building retirement savings. The distributions from these plans are then generally taxed as ordinary income when withdrawn during the retirement years. If your employer offers a match on a 401(k) or 403(b) plan, consider making contributions to the extent you capture the entire employer benefit. Beginning in 2025, a notable tax law change allows workers between the ages of 60 and 63 to make an enhanced catch-up contribution to employer-sponsored retirement plans. This allows workers approaching retirement to accelerate savings during their peak earning years. Some employer plans offer a Roth option where the contributions are made with after-tax dollars, but qualified withdrawals can be tax-free. See the chart below for a summary of 2026 contribution limits.

Beginning in 2026, a major tax change affects higher-income employees who make catch-up contributions. Workers aged 50 and older whose prior-year wages exceed the IRS threshold of $150,000 will generally be required to make catch-up contributions on a Roth basis, rather than as traditional pre-tax contributions. This means those contributions will no longer reduce taxable income in the year they are made. While this change may increase current-year tax liability for some investors, it also creates an opportunity for future tax-free withdrawals. Individuals need to reevaluate their tax diversification strategy and consider how Roth assets fit into their long-term retirement income plan.

What Are My Options If I Am Self-Employed?

For small-business owners and self-employed professionals, the Simplified Employee Pension (SEP) IRA is one of the most attractive retirement savings vehicles. Recommended for small business owners with few or no employees, SEP IRAs generally limit contributions to those made by the employer, with no option for elective employee deferrals. SEP IRAs offer high contribution limits, straightforward administration, and valuable tax deductions for employers. Recent legislation has introduced the option of the Roth SEP IRA to employers, where contributions are included in the participant’s taxable income in the year they are made, but qualified future withdrawals can be tax free.

Also available to small businesses and self-employed individuals is the Savings Incentive Match Plan (SIMPLE) IRA. The SIMPLE IRA is available to employers with 100 or fewer employees who earned at least $5,000 in the prior year and who do not have another qualified retirement plan. Similar to the SEP, the SIMPLE IRA offers an easy-to-administer and cost-effective alternative to more complex retirement plans. Although both the SEP and SIMPLE plans require employer contributions, the SIMPLE IRA also allows employees to make tax-advantaged retirement contributions. For eligible employers with 25 or fewer employees, the annual elective deferral limit and catch-up contribution limit are automatically increased to $18,100 and $3,850, respectively. For employers with 25–100 employees, the employer must make an election for the higher elective deferral limits to apply.

For businesses whose only employee is the owner, a solo 401(k) can be another attractive retirement vehicle. It not only may allow both employee deferrals and employer contributions, it may also allow loans against the plan (if the plan document allows). In addition to employee deferrals (see chart below), the business may also contribute up to 25% of compensation or 20% of self-employment income for a self-employed owner.

Am I Limited to How Much I Can Contribute to an IRA?

Both traditional and Roth IRAs are subject to income limitations. For traditional IRAs, the income limitations determine the deductibility of the contribution, not whether the taxpayer can contribute. The deduction phaseout is based on the taxpayer’s modified AGI and filing status. For example, a couple married filing jointly for the 2026 tax year will see their Traditional IRA contribution deductions limited starting at a modified AGI of $129,000.

Roth IRAs are also subject to income limitations (a married couple filing jointly for tax year 2026 sees the limitation phase in at a modified AGI of $242,000). Unlike the Traditional IRA income limitations, however, the Roth IRA income limitations do restrict the amount the taxpayer can contribute. In this example, the couple would see their Roth IRA contributions completely phased out once their modified AGI reaches $252,000.

How Can I Save Now to Mitigate Medical Expenses in Retirement?

Although not recognized specifically as a retirement plan, Health Savings Accounts (HSAs) can be used to fund health costs incurred during retirement. Contributions to an HSA are generally tax-deductible or made through pre-tax payroll deductions. If you are covered by a high-deductible health plan, you are eligible to make annual contributions (up to $4,400 for a self-only plan, $8,750 for family coverage in 2026) that can grow tax-free in the HSA account. Those contributions accumulate to be used for qualified medical expenses anytime, including in future retirement years, and the withdrawals will be tax-free. HSA contributions must stop when you are entitled to Medicare, even if you continue to work.

Tax-Advantaged Retirement Plans: What Every Taxpayer Should Do Now

Stay informed and periodically adjust your savings strategies. Tax laws continue to evolve, and retirement strategies must evolve with them. Being proactive can maximize tax advantages, improve retirement readiness, and build greater financial security for the future.

Reach out to your BRC tax advisor to discuss which retirement strategy aligns best with your savings goals.