Social Security was never meant to be the sole source of a person’s retirement income: rather, it was part of a three-pronged approach that also includes pensions and personal savings. However, in the private sector, traditional pensions have largely been replaced by DC plans.Nearly three in four Americans expect to rely on Social Security in retirement, according to research from Empower. (2) But with an average monthly check of $2,008.31 for retired workers (as of July 2025), that won’t be enough for most ...

Retirement Account Contribution Limits - The contribution limit for individual retirement accounts (IRAs) will increase to $7,500 in 2026, with a catch-up contribution limit of $1,100 for individuals aged 50 and older [2] - For Roth IRAs, the income limit for contributions will rise to between $153,000 and $168,000 for singles and heads of household, and between $242,000 and $252,000 for married couples filing jointly [3] - The contribution limit for 401(k), 403(b), 457 plans, and the federal Thrift Savings Plan will increase to $24,500, with an $8,000 catch-up for those aged 50 and older [4] Health Savings Accounts (HSAs) - The annual contribution limit for HSAs will increase to $4,400 for individuals and $8,750 for family coverage in 2026, with an additional $1,000 catch-up contribution for those aged 55 or older [6] Social Security Benefits - The Social Security Administration will implement a 2.8% cost-of-living adjustment (COLA) for 2026, resulting in an average increase of $56 per month for approximately 75 million retired seniors and disabled workers [8]

Core Insights - Contribution rates to workplace retirement plans are often set early in a career and may remain unchanged for years, significantly impacting long-term retirement readiness [2][4] - Most workers lack awareness of how their contribution rates compare to others, making it difficult to assess if they are on track for retirement [3][5] Contribution Rates by Age and Income - J.P. Morgan's 2025 report indicates that contribution rates increase with age: Gen Z averages 3.7%, Millennials 5.0%, Gen X 6.0%, and Baby Boomers just over 7%, all below the recommended 10% [6][9] - Higher earners contribute more, but even among top earners nearing retirement, average rates are under 9%, indicating a broader trend of insufficient contributions [8][11] Impact of Contribution Increases - A 1% increase in contribution rates can lead to significant long-term benefits; for example, a worker increasing from 5% to 8% in their mid-20s could accumulate about $84,000 more by retirement compared to someone who does not increase their rate [14][15] - Timing of contribution increases is crucial; a late increase yields much lower additional savings, highlighting the importance of early adjustments [15] Strategies for Improvement - Small, manageable increases in contribution rates are recommended, as they are easier to sustain and can have a meaningful long-term impact [16][19] - Automation of annual increases in contribution rates can help maintain consistent growth without requiring annual decision-making [17] - Ensuring full utilization of employer match programs can enhance total savings rates without significantly increasing personal contributions [18]

Core Insights - The IRS has announced the contribution limits for 401(k) and other tax-advantaged retirement accounts for the upcoming year, allowing workers to save more for retirement [3][4]. - The new contribution limit for 401(k) accounts is set at $24,500, an increase from $23,500 in the previous year, while traditional IRA contributions can now reach $7,500, up from $7,000 [3][4]. - The announcement is particularly significant in light of new tax breaks introduced by recent legislation, which may incentivize higher contributions to 401(k) plans to manage taxable income [2][5][6]. Contribution Limits - Workers can contribute up to $24,500 in 401(k) plans and similar accounts, marking a $1,000 increase from the previous year [3]. - Traditional IRA contribution limits have also increased to $7,500, providing additional savings opportunities for individual savers [3]. Tax Planning Implications - The new contribution limits serve as a tax-planning tool, especially for those looking to stay below income thresholds established by new tax laws [5][7]. - Financial advisers suggest that maximizing 401(k) contributions can help individuals reduce their taxable income, thereby benefiting from the new tax breaks [6][7]. Participation Rates - According to Vanguard research, only about 14% of individuals contributed the maximum allowable amount to their 401(k) plans in 2024, indicating a potential area for growth in retirement savings [9]. Benefits for Older Workers - The IRS update includes provisions that allow older workers (ages 50 to 59) to save more in their retirement accounts, which is a positive development for this demographic [10][11].