2026 Changes in Retirement Rules

As 2026 begins, several important retirement-related rules and financial thresholds are changing — from retirement account contribution limits to Social Security benefits and taxation. These updates are designed to help savers keep pace with inflation, adjust long-term planning strategies, and respond to legislative reforms such as the SECURE 2.0 Act and the “One Big Beautiful Bill” (OBBBA) tax provisions. 

Higher Contribution Limits for Retirement Accounts

Due to higher cost of living, one of the most tangible changes for retirement savers is the increase in how much you can contribute to tax-advantaged accounts. Beginning in 2026:

• 401(k), 403(b), and most 457(b) plans: The base elective deferral limit rises to $24,500, up from $23,500 in 2025.  
  • For ages 60-63: a “super catch-up” limit remains at $11,250 for 401k’s  (Total $35,750 if eligible)
  • For workers over 50: For 401k’s an additional catch-up of $8,000 (Total of $32,000 if eligible)
• Traditional and Roth IRAs: The contribution cap increases to $7,500.  
• Catch-up contributions:
  • For workers over 50: an additional $1,100 (Total $8,600)

Why, when, and how to effectively contribute to your retirement accounts varies by individual. A good retirement advisor can create a customized plan of action for you.  

Mandatory Roth Catch-Up Contributions Under SECURE 2.0

A major shift brought by the SECURE 2.0 Act takes effect in 2026: if your Social Security wages (reported in Box 3 of your W-2) exceeded approximately $145,000 in the prior year, your catch-up contributions for that year must now go into a Roth (after-tax) account rather than traditional pre-tax plans. 

This change means high-earning workers who previously benefited from upfront tax deductions on catch-up contributions will pay taxes on those amounts now. This makes future withdrawals tax-free. This actually could benefit some retirees as taxes are expected to rise over the next decade. Unfortunately, workers whose plans don’t offer a Roth option may not be able to make catch-up contributions at all under this rule. 

Social Security Adjustments

• Cost-of-Living Adjustment (COLA) — Benefits will increase around 2.8%, raising average monthly payments by about $56.  
• Wage base limit — The maximum amount of earnings subject to Social Security tax increases to approximately $184,500.  
• Work credit value — The earnings required to earn one work credit will increase, making it easier for workers to qualify for benefits sooner.  
• Earnings-test limits for working retirees — Limits on how much income you can earn before benefits are reduced will rise modestly, allowing retirees working before full retirement age to keep more of their benefits while they continue to work.

Additionally, the long-anticipated full retirement age under Social Security has now stabilized at 67 for people born in 1960 or later, easing planning for future retirees. 

Tax and Planning Considerations

Tax brackets and deductions are also being adjusted for 2026 following tax legislation changes, which can affect retirees’ overall tax burden and retirement income strategies. Understanding these updates now can help you plan Roth conversions, distribution timing, and required minimum distributions more effectively. This can be very confusing for many of us. January is a great time to plan what actions you need to take on your retirement portfolio to maximize these changes, making sense of these changes is our specialty. Call us for your free consultation at 810-232-2300. We’d be happy to help answer any questions you may have.

Katrina Savage

Alliance Financial Group, Inc.

Investment Advisory Services offered through Redhawk Wealth Advisors, Inc., an SEC Registered Investment Advisor. SEC Registration does not imply any level of skill or understanding. Insurance and annuity products sold separately through Alliance Financial Group, Inc. Alliance Financial Group and Redhawk Wealth Advisors are unaffiliated and separate legal entities.