401(k) Limits Rise for 2026 as IRS Increases Cap

The IRS has increased the 401(k) employee contribution limit to $24,500 for 2026, up from $23,500 in 2025.
Workers aged 50 and older can make catch-up contributions of up to $8,000, while those aged 60 to 63 can contribute an additional $11,250 under Secure 2.0 provisions.
Despite higher limits, only 14% of workers maxed out their 401(k) plans in 2024, per Vanguard’s latest report.

Key Takeaways

More Room to Save

According to CNBC, the IRS on Thursday announced new retirement plan contribution limits for 2026, allowing workers to stash away more in tax-advantaged accounts. The employee contribution cap for 401(k), 403(b), and most 457 plans — as well as the federal Thrift Savings Plan — will increase by $1,000, rising to $24,500.

This adjustment reflects broader inflation-driven updates to tax and savings thresholds released by the agency in recent weeks.

Catch-Up Contributions Get a Boost

For workers nearing retirement, the catch-up contribution limit will also increase. Starting in 2026, those aged 50 or older can save an extra $8,000, up from $7,500 in 2025.

Meanwhile, the Secure 2.0 Act continues to offer a special provision: workers aged 60 to 63 can contribute an additional $11,250 — an amount unchanged from 2025 — on top of the standard deferral limit.

Most Americans Aren’t Maxing Out

Despite the increase in 401(k) contribution limits, most Americans don’t take full advantage. Only 14% of savers hit the maximum contribution in 2024, according to Vanguard’s 2025 How America Saves report, based on data from over 1,400 plans and nearly 5M participants.

The average total savings rate — combining employee and employer contributions — hovered around 12%. Fidelity Investments reported a slightly higher 14.2% average savings rate in Q2 2025 across more than 25,000 corporate plans.

Context & Timing

The IRS announcement comes on the heels of a major federal funding bill signed into law by President Trump, ending the nation’s longest-ever government shutdown. It also follows the agency’s October inflation-adjusted updates to income tax brackets, capital gains thresholds, and family-related tax provisions.

Looking Ahead

These changes continue a trend of inflation-driven adjustments giving savers more opportunities to build retirement wealth. With workplace plans remaining a key pillar of retirement readiness, the new limits offer a valuable chance for Americans — especially older workers — to bolster their savings in the years leading up to retirement.