Retirement Retirement Planning

Could Trump’s Tax Plans Affect Your 401(k)? Here’s What to Watch

How some new tax policies will impact American workers.

By Catherine Collins

Edited by Andrea Basse

Updated Jan. 8, 2026

New federal tax plans can impact your net income, how much you're able to save each year, and the percentage you'll have to pay in taxes once you retire. President Donald Trump has made several tax policy updates during his presidency. He has introduced new legislation that will affect millions of workers who contribute to 401(k) retirement plans. Additionally, President Trump extended many of the policies enacted in the 2017 Tax Cuts and Jobs Act during his first presidential term.

Here are some important financial topics and potential changes to consider if you regularly invest in a 401(k).

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Your tax bracket

Your income determines your tax bracket, and your tax bracket determines how much of your paycheck you get to keep. In 2017, President Trump signed the Tax Cuts and Jobs Act. This legislation lowered individual tax rates for many people, but the changes were going to expire in 2025. So, in 2025, President Trump extended some of these tax cuts as part of the One Big Beautiful Bill, but not all of them. That means that you should check with your accountant to see whether or not these extensions will benefit you when it comes time to file your taxes in 2026.

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Your 401(k) contribution limit

The IRS increased 401(k) contribution limits starting in 2026. Now, individuals can contribute $24,500 a year to their 401(k)s. And, if you're age 50 and above, you can now contribute $8,000 in catch-up contributions to your 401 (k), an increase of $500 from the previous year. If you're between the ages of 60 and 63, your catch-up contribution is $11,250. However, if you are a high earner making $150,000 a year or more, your catch-up contributions must be made as Roth contributions, which is a change from previous years.

While not directly related to Trump's tax policies, as these increases were a result of the Secure Act 2.0, the amount of money you contribute to your 401(k) will impact the amount of your taxable income. And, your taxable income will determine your tax bracket and the amount of tax you pay each year.

Social Security

Another topic to watch is Social Security. Thus far, there has not been new legislation dedicated to improving the Social Security program. As of now, there is enough money on hand for Social Security to be fully funded through 2033, but after that, the program would not be fully funded, according to the 2024 OASDI Trustees Report. The One Big Beautiful Bill did incorporate a $6,000 tax deduction for those over age 65, however.

Alternative assets

In August of 2025, President Trump signed a new executive order that asked agencies to consider allowing 401(k) plans to include alternative investments such as cryptocurrency, digital assets, real estate, and private equity. The order aims to make investments like these available to everyday employees. The order does not make this a law, but it does instruct agencies to begin reviewing how to incorporate these options into 401(k) plans.

401(k) policies that stay the same

Even though there is still a fair amount of economic uncertainty and the impact of these new laws is not yet fully known, some aspects of 401(k) policies will remain the same. First of all, your contributions to a traditional 401(k) account still come with tax advantages. Employers will still make employer matches if they choose to. Investing for the long term is still the best way to ensure your retirement goals are on track.

How to stay informed (without reading tax code)

It can be challenging to stay up to date with these tax changes, and let's be honest, very few people want to read text code in their spare time. However, your employer should communicate 401(k) plan changes that apply to you. If you have any questions, you can always consult your human resources department.

When it makes sense to ask for professional help

Sometimes, your human resources department can help you better understand your workplace's 401(k) plan; however, they cannot provide tax advice on your personal financial situation. If you're unsure whether or not you're making the right choices when it comes to your 401(k) investments, it's a good idea to work with a certified financial planner and an accountant to make sure that you are fully optimizing your 401(k).

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Bottom line

President Trump made several changes to the tax law during his first presidency, and now, during his second presidency, he has extended some of his 2017 tax policies. Additionally, he has issued executive orders that will affect the types of investments you can make in your 401(k) in the future. Many of these changes can affect your 401(k), but they can also be complicated to understand. For that reason, it's always a good idea to consult a professional to ensure you're making the best choices that will enable you to retire comfortably in the future.

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