Tada Images / Shutterstock.com On November 13, the Internal Revenue Service (IRS) announced some sweeping changes to contribution limits for 401(k) savers who may be part of the investor cohort who are willing and able to maximize these retirement accounts. Quick Read The IRS raised 401(k) contribution limits to $24,500 for 2026, up $1,000 from 2025. Workers aged 50 and older can now contribute up to $32,500 total with the new $8,000 catch-up limit. If you’re thinking about retiring or know someone ...

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].