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The IRS Gift for 2026 That Could Help You Catch Up on Retirement Savings

Higher contribution limits in 2026 give savers an opportunity to boost long-term wealth — especially if retirement is closer than it feels.

By Adam Palasciano

Edited by Laura Hohenstein

Updated Dec. 31, 2025

The IRS gave savers a meaningful win for 2026, raising retirement account contribution limits across several plans. These higher caps create new opportunities to set yourself up for retirement, especially if you started saving later than planned. Even small increases can add up quickly when combined with employer matches and tax advantages. Planning ahead now can make it easier to take full advantage once the new year hits.

Here's how the new limits work and how to use them strategically.

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The IRS increased qualified retirement plan contribution limits for 2026

For 2026, the IRS raised the employee contribution limit for 401(k), 403(b), governmental 457 plans, and the federal government's Thrift Savings Plan to $24,500, up from $23,500 in 2025. Workers age 50 and older can still make an $8,000 catch-up contribution, up from $7,500 in 2025, while those ages 60 to 63 qualify for a higher catch-up of $11,250, reflecting changes under the Secure 2.0 Act.

At the same time, the annual IRA contribution limit also increased to $7,500, compared with $7,000 in 2025. These increases give late-career savers more room to close retirement gaps.

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Why it's important to max out your retirement account contributions annually

Maxing out contributions isn't just about saving more — it's about leveraging tax advantages year after year. Pre-tax contributions reduce current taxable income, while Roth contributions lock in tax-free growth.

Consistently contributing the maximum also builds a disciplined savings habit that compounds over decades. Even if you cannot max out every year, moving closer to the limit can materially improve long-term outcomes.

Take advantage of any available employer matching contribution

Employer matches are one of the easiest ways to accelerate retirement savings. Your company may match a percentage of your contributions, effectively providing an immediate return on your investment.

Failing to contribute enough to earn the full match means leaving free money on the table. With higher IRS limits in 2026, it may be worth reassessing contribution percentages to ensure you capture every available dollar.

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Start saving for retirement as early as possible

Time is one of the most powerful tools in retirement planning. Money invested earlier has more years to compound, reducing the amount you need to save each month.

For example, someone who starts in their 20s can often save far less annually than someone who waits until their 40s to reach the same balance. While higher limits help late starters, consistency over time remains a big advantage.

How to start saving for retirement if you haven't already

If you haven't begun saving for retirement, start by identifying how much room you have in your budget for consistent contributions. Opening a workplace retirement account or an IRA is often the fastest way to begin building tax-advantaged savings.

Even modest, automatic contributions can add up over time and help establish the habit of saving. As your income grows or expenses fall, you can gradually increase contributions to strengthen your long-term retirement outlook.

Cut back on unnecessary expenses

Reducing discretionary spending can free up money for retirement contributions without drastically changing your lifestyle. Reviewing subscriptions, dining habits, and recurring expenses may reveal easy savings opportunities.

Once you cut back, redirecting those dollars into a retirement account can turn short-term sacrifices into long-term gains. Over time, these small changes could fund thousands in additional contributions that should compound over time.

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Reduce and eliminate high-interest debt

High-interest debt competes directly with retirement savings for your money. Paying down credit cards or personal loans can improve cash flow and lower financial stress.

Once those balances are reduced or eliminated, the freed-up funds can be redirected into tax-advantaged accounts. This approach strengthens both your balance sheet and your future income potential.

Increase contributions gradually as income rises

If you're not able to jump straight to the maximum contribution limit, that's okay. Increasing contributions incrementally — such as after getting a raise or a bonus — can make saving feel more manageable.

Check if your plan allows for automatic annual contribution increases, which can help you save more without any extra effort. Over time, these gradual increases could help you get closer to the IRS maximum limit.

Bottom line

The IRS's higher 2026 contribution limits create a valuable window to strengthen retirement savings, especially for those playing catch-up. When combined with employer matches, catch-up contributions, and disciplined planning, these changes can meaningfully improve long-term financial security.

Using the increased limits as part of a broader retirement plan can help transform higher caps into real progress, not just bigger numbers on paper.

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