I’m A Financial Planner: 4 Things To Know About 401(k) Changes In 2026

LightField Studios / Shutterstock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

A number of changes are coming to 401(k) plans in 2026, including higher contribution limits for all account holders. The amount individuals can contribute to their 401(k) plans will rise to $24,500 in 2026 from $23,500 for 2025, according to the IRS.

Another change, included in the Secure 2.0 Act of 2022, targets high earners over 50 only. This change will have a direct impact on tax strategies and take-home pay of those affected. Here are four things to know about the 401(k) changes in 2026, according to a financial advisor.

Who Is Impacted

The Secure 2.0 provision that goes into effect next year affects earners over the age of 50 who make annual incomes of $145,000 or more, said Bethany Dever, CFP, Vice President and Relationship Manager at Rockland Trust Investment Management Group. Beginning in 2026, such earners are required to make any catch-up contributions after taxes to a designated Roth 401(k) account, Charles Schwab noted in a blog.

So what can they expect when the new rule takes effect?

“[It] means paying taxes on those contributions now, but enjoying tax-free withdrawals in retirement for those individuals who fall under those two requirements,” Dever told GOBankingRates.

How to Weigh the “Tax Now, Tax-Free Later” Trade-Off

Paying taxes now “could pay off,” Dever said, if you expect future tax rates to rise or want more flexibility in managing taxable income in retirement.

Alternatively, if you expect a lower income post-retirement, then keeping more pre-tax savings might make sense. In this case, you should aim to keep part of your money in other types of accounts.

“A balanced approach — combining traditional and Roth contributions — can help smooth out tax exposure across both sides of retirement,” said Dever.

Smart Ways to Maximize Contributions Before Year-End

The vast majority of people over 50 don’t make catch-up contributions on their 401(k)s, according to a report released earlier this year from Vanguard. If you belong to that group, there are steps you can take to maximize your retirement savings.

“Consider increasing your monthly contribution to your employer-sponsored retirement plan to the maximum allowed,” Dever advised. “If your employer offers such a match, make sure you’re contributing enough money to qualify for the full amount offered. After all, it is free money that you will not receive if you don’t participate.”

Alternative Options to Consider

If the 401(k) changes aren’t to your liking, one alternative is to open a health savings account (HSA).

An HSA is a tax-free savings account that helps eligible individuals pay for qualified medical care. Not only do you put pre-tax money into an HSA, but you can also make tax-free withdrawals — so long as you use the funds for qualified healthcare expenses.

As Dever noted, HSAs are currently funded by pre-tax dollars, so they can help reduce your current taxable income as well, giving them a “triple tax advantage.”

“Maxing it out before Dec. 31 can further enhance your retirement strategy,” Dever said. “You can use automatic transfers to build savings in your HSA and, in some cases, invest funds for long-term growth.”

Share This Article: