401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500!

The IRS announced the contribution limit for 401 (k)and IRA limits for 2026 yesterday. American workers contributing to retirement plans should know the limits to plan their retirement and ensure they do not have to pay taxes on overcontribution. The article covers everything you wish to learn about the IRA and 401(k) limits. 

The IRS released the new limits for the retirement plans just after the Trump administration announced the end of the federal shutdown that lasted for 42 days. The workers and employers were waiting for the limits to be announced for a long time and speculating about them. 

The speculation of the 401(k) contribution limit increasing by $1000 has come true, as it is $24,500 for 2026 from $23,500. The retirees keep the retirement plan limit in mind to ensure they contribute under the limit.

What are the new IRS limits for 2026?

Americans who participate in the retirement plans 401(k) and others can check the contribution limit for 2026 below:

• The contribution limit for the 401(k), 403(b), the federal government Thrift Savings, and governmental 457 plans is increased from $23,500 to $24,500 for 2026.
• The annual contribution limit for the IRS also increased from $ 7,000 to $ 7,500 for 2026. 
• The IRA catch-up contribution limit for people aged 50 or above was amended to $1,100 from $1000 under the SECURE Act 2.0. 
• The catch-up contribution for workers aged 50 or above participating in 401(k) and other plans can be up to $8000 in 2026, up from the previous limit of $7500. 
• The higher catch-up limit for the employees aged 60, 61, 62, and 63 will remain $11,250.

Who will benefit the most from the increased limits?

With the IRS increasing the retirement plans, here’s who will benefit the most and secure higher retirement income:

• Elderly age 50 and over: The elderly aged 50 or over can contribute up to $32,500, thanks to the contribution limit, to allow them a chance to save more for their retirement.
• Higher-aged employees: Workers working at the ages of 60, 61, 62, and 63 can contribute up to $35,750 to their 401(k) plan. 
• Both 401(k) and IRA: If you are someone who is contributing to both the 401(k) and IRA, you can contribute more, which will help you save more for retirement. 

What income threshold is for the deductible for 2026?

With the increase in the contribution limit, the IRS has also increased the deductible phase-out ranges. Taxpayers can deduct the contribution made to the traditional IRA when they meet certain requirements. If your spouse and you are not covered by the retirement plan at work, the phase-out deduction does not apply to you.

Here’s the phase-out limit for the taxpayers contributing to the traditional IRA, depending on the filing status:

• Individuals and single taxpayers’ phase-out range increased from $79,000 to $89,000 to $81,000 and $91,000 for 2026.
• The married couples filing their tax return jointly have the phaseout limit increased from $126,000 – $146,000 to $129,000 – $149,000 for 2026.
• If you are married to someone who is covered under the retirement plan at work but you are not, the phase-out range will be increased from $236,000 – $246,000 to $242,000 – $252,000 for 2026.
• If you are married but filed taxes separately and are covered under the retirement plan at work, the phase-out range will remain between $0 and $10,000. 

What will be the consequences of overcontributing?

If you contribute over the limit to the 401(k) and IRAs, you will be subject to paying taxes if you do not take any action, such as:

• You should withdraw the excess amount before the tax filing to avoid paying taxes on overcontribution. 
• The excess contribution will also be taxed when you withdraw the money from the account, so if you do not take any action, you will be taxed twice. 
• If you have a 401(k) account, you will pay the penalty of 10% on the excess contribution for early withdrawal. 
• On the IRA excess contribution, you will pay a 6% excise tax for each year the overcontribution remains in your account. 

The IRS has announced the contribution limit for the retirement plan for 2026; workers should check the limit to ensure they do not go over the limit.  

Disclaimer: 2026 401(k) and IRA limit information is for general awareness only. Official contribution limits are determined by the IRS.