The Internal Revenue Service published the 2026 retirement contribution limits in Notice 2025-67 on October 31, 2025, lifting the 401(k) elective deferral cap to $24,500 from $23,500 and raising the IRA limit to $7,500 from $7,000. For advisors handling the year-end review cycle, the dollar increases sit on top of two SECURE 2.0 provisions that genuinely change participant behavior. The mandatory Roth catch-up for higher-paid employees takes effect for the first full plan year, and the long-term care withdrawal carve-out becomes operational. Plan sponsors that have not updated their participant communications now have a six-week window before the first 2026 payroll cycle.
The new ceiling is not the headline. The headline is the $1,100 catch-up for IRA savers age 50 and over, replacing the static $1,000 figure that had been frozen in statute since 2006 before SECURE 2.0 indexed it. That brings the total IRA opportunity for the 50-and-over cohort to $8,600 for 2026. The 401(k) catch-up moves to $8,000 from $7,500, and the special “super catch-up” for participants age 60 through 63 lands at $11,250 per the SECURE 2.0 §109 formula. Mercer Advisors flagged in its November 2025 client memo that the super catch-up cohort is the demographic most likely to be under-funding in 2026 because plan sponsors have been slow to update payroll codes.
Key Takeaways for Advisors
- 401(k) elective deferral limit rises to $24,500 in 2026, up $1,000 from $23,500 in 2025
- IRA contribution limit moves to $7,500 with a $1,100 catch-up, totaling $8,600 for savers age 50 and over
- The SECURE 2.0 mandatory Roth catch-up triggers for participants whose 2025 Social Security wages exceeded $150,000, up from the $145,000 threshold
- Social Security recipients receive a 2.8% COLA effective January 2026, averaging $56 per month for individual retirees and $88 for married couples
- The SECURE 2.0 long-term care withdrawal carve-out allows up to $2,500 per year from IRAs and qualified plans without the 10% early-withdrawal penalty when used for qualifying LTC premiums
What Actually Changed in the Numbers
The IRS table for 2026 reflects a deliberate slowdown in inflation indexing. The 401(k) deferral rose 4.3 percent, half the pace of the 2025 adjustment, and the IRA limit moved 7.1 percent because it had been static for three years before SECURE 2.0 unlocked the indexing formula. The total defined contribution annual addition limit under section 415(c) rose to $72,000, allowing high-earning self-employed clients to push solo 401(k) contributions meaningfully higher when employer profit-sharing is layered on top.
Highly compensated employee status under section 414(q) lifts to $160,000 for 2026, up from $155,000. That number quietly disrupts nondiscrimination testing at smaller plan sponsors, and Fidelity Institutional Insights noted in its November 2025 plan sponsor bulletin that roughly 18 percent of small-business 401(k) plans will see at least one previously rank-and-file participant cross into HCE status next year purely from the threshold mechanics, before any compensation changes.
The defined benefit plan limit under section 415(b) sits at $290,000 of annual benefit, and the SEP-IRA compensation floor moves to $750. The SIMPLE IRA deferral cap rises to $17,500 with a $4,000 catch-up for ages 50-59 and a $5,250 super catch-up for ages 60-63. Cash balance plans and floor-offset designs get a meaningful tailwind from the §415(b) lift, particularly for owner-only practices in the medical and legal verticals where DB plans are routinely paired with 401(k)s.
The Roth Catch-Up Mandate Goes Live
The SECURE 2.0 §603 mandatory Roth catch-up is the operationally hardest provision in the 2026 limit set. Beginning January 1, 2026, any participant whose prior-year Social Security wages from the same employer exceeded the indexed threshold of $150,000 must direct their entire catch-up contribution to a designated Roth account, not pretax. Treasury Department final regulations published in September 2024 confirmed the look-back applies to the employer level, meaning a participant who changed jobs and earned $200,000 at the prior employer and $90,000 at the new one is not subject to the mandate.
The compliance failure mode is predictable. Plan sponsors that have not coded the §603 logic into their payroll system will process pretax catch-ups for affected participants, creating an operational failure that must be corrected through the Employee Plans Compliance Resolution System. Groom Law Group’s December 2025 client alert estimated that roughly 31 percent of mid-market plan sponsors had not completed §603 system updates as of November 2025, despite a two-year transition period that closed at end of 2025.
For advisors, the question is which clients fall into the mandate band and whether their existing tax projection assumes pretax treatment. The cleanest test is the prior calendar year Form W-2 box 3 amount. If 2025 box 3 reads above $150,000 and the client intends to make catch-up contributions in 2026, the catch-up will be Roth regardless of pretax election. Year-end tax projections built before this guidance need to be redone, particularly for clients sitting in the 32% federal bracket where the Roth conversion math is most sensitive.
Social Security COLA and the IRMAA Cliff
The 2.8% Social Security cost-of-living adjustment is slightly above the 2025 figure of 2.5%, reflecting CPI-W readings through the third quarter of 2025. The average retiree benefit rises by approximately $56 per month, the average couple benefit by $88. The maximum taxable earnings base for Social Security payroll tax lifts to $179,400 for 2026, up from $176,100, with measurable consequences for high earners in the 7.65% FICA window.
The IRMAA brackets for 2026 Medicare premiums shifted upward in step. The first surcharge tier now begins at modified adjusted gross income of $108,000 for single filers and $216,000 for joint filers, both based on the 2024 tax return that Medicare will use for 2026 premium determinations. Clients who triggered Roth conversions in 2024 will see the IRMAA consequence land in 2026, and the conversation worth having now is whether the higher 2026 conversion brackets created by OBBBA permanence change the math going forward.
Kiplinger’s November 2025 column on the 2026 IRMAA tables emphasized the two-year look-back. Advisors who model income smoothing for the IRMAA brackets should pull the 2024 actual MAGI and the 2025 projected MAGI in parallel, since the 2026 premium and the 2027 premium are already locked into the IRS data feeds by tax-year cohort.
The Long-Term Care Withdrawal Becomes Operational
The SECURE 2.0 §334 long-term care insurance exception to the 10% early-withdrawal penalty is operational for distributions taken on or after December 29, 2025, and 2026 is the first full year of availability. Eligible participants can withdraw up to the lesser of 10% of the vested account balance or $2,500 (indexed) per year from IRAs and qualified plans without penalty, when used to pay premiums on a “high-quality” LTC insurance policy meeting the statutory definition under §7702B.
Two operational gates matter. First, the LTC policy must qualify, which excludes most life insurance hybrid products that include LTC riders but lack the §7702B safe harbor. Second, the participant must obtain a certification from the insurer that the policy is qualified, and the plan administrator or IRA custodian needs that certification on file before processing the distribution. The Treasury proposed regulations in October 2025 detailed the certification format, and Morningstar’s analysis noted that no major LTC carrier had issued the certification letter at scale as of mid-November 2025.
For clients in their late 50s holding qualified LTC policies, the carve-out reframes the premium funding question. The $2,500 annual withdrawal can be used to maintain coverage that would otherwise lapse from cash flow constraints, and the absence of the 10% penalty makes the math meaningfully better than paying premiums from after-tax income inside a constrained budget. Advisors should not assume the operational pieces are in place at every custodian.
Questions to Bring to the Year-End Review
Advisors planning January 2026 client meetings should not arrive without three specific answers per household. First, does the client’s 2025 Form W-2 box 3 exceed $150,000? If yes, any 2026 catch-up contributions will be Roth and tax projections need adjustment. Second, has the client’s plan sponsor confirmed §603 system readiness? A no answer creates operational risk that the client will not see until the corrective W-2c arrives in 2027. Third, what is the household’s 2024 MAGI and how does it compare to the 2026 IRMAA bracket entry points?
A fourth question worth bringing for clients age 60-63: has the super catch-up of $11,250 been coded into the payroll deduction election? Plan sponsors that have not updated payroll systems will process the standard $8,000 catch-up by default, and participants will not catch the error without a year-end statement audit. The remediation through EPCRS is administratively painful, and a quick sponsor-level confirmation in January is cheaper than a 2027 corrective distribution.
The 2026 limit cycle is procedurally heavier than any since the original SECURE Act in 2019. Plan sponsors that treat the new numbers as a routine indexing update are likely to surface compliance failures in mid-2026, when the first §603 Roth catch-up errors get caught by recordkeeper audits. For advisors, the playbook is to push every plan sponsor relationship and every household tax projection through the four-question filter before January 31. The work compounds quickly through the year, and the EPCRS correction process is the most expensive way to learn that a system update never happened.
Important disclosure: This article summarizes IRS Notice 2025-67 and SECURE 2.0 implementing guidance current as of publication. It is not tax advice. Plan sponsors and individual savers should consult ERISA counsel and a qualified tax practitioner before making 2026 elections. Figures referenced are subject to IRS technical corrections and Treasury final regulations.
About Me
Aimad Zahid is Master's degree, Management science - Finance and investment strategist with experience in asset management, corporate strategy, and multi-asset investing
