At Lido Advisors, we look at decisions like these as part of a bigger picture. Through Lido One, we bring together tax planning, investment management, estate planning, and financial planning, which can help identify gaps and surface opportunities that are easy to miss when these disciplines are handled separately, including how a change like this fits into your broader plan.
This article covers the 2026 IRA and 401(k) contribution limits, the related income thresholds, and the general deduction rules, along with how these changes may fit into a broader financial plan.
The $24,500 employee limit generally applies across all of an individual’s traditional and Roth workplace plans, not separately to each account. The $72,000 combined limit includes employee contributions, employer matching contributions, and other employer contributions, but generally excludes age-based catch-up contributions.
2026 401(k) Contribution Limits: How Much Can You Defer?
The 401(k) employee contribution limit rises to $24,500 in 2026, up from $23,500 in 2025. This limit generally also applies to 403(b) plans, governmental 457(b) plans, and the federal Thrift Savings Plan. Plan terms, not just IRS limits, ultimately determine which contribution options, catch-ups, and employer contributions are available to you, so may be worth confirming the details with your plan administrator.
Traditional 401(k) Contribution Limits
Traditional 401(k) contributions are generally made on a pretax basis, which can reduce your current taxable income. Contributions and investment earnings are typically taxed at the time of withdrawal. For savers who want to lower this year’s tax bill and expect to be in a lower bracket in retirement, traditional contributions may make sense.
Roth 401(k) Contribution Limits
Roth 401(k) contributions are made with after-tax dollars, so they generally do not lower your current taxable income. Qualified withdrawals, however, can be tax-free. Unlike Roth IRAs, Roth 401(k)s have no income limits, so high earners can generally contribute regardless of their modified adjusted gross income (MAGI).
Traditional and Roth 401(k) contributions share the same $24,500 employee limit. For example, an employee could contribute $14,500 to a traditional 401(k) and $10,000 to a Roth 401(k) in the same year, but not $24,500 to each. The choice often comes down to whether a current tax deduction or future tax-free retirement income matters more in your situation, which is a question that may be worth working through with a tax professional.
Employer nonelective or profit-sharing contributions
After-tax employee contributions, when the plan permits them
For example, if an employee contributes $24,500 and the employer adds $10,000, the combined total of $34,500 counts toward the $72,000 limit, leaving room for additional employer or after-tax contributions if the plan allows them.
Business owners and self-employed individuals who use a solo 401(k) can generally contribute in both the employee and employer roles. Solo 401(k)s are still subject to plan and compensation rules, so they may be worth discussing with a tax professional if you are weighing one as part of your retirement strategy.
2026 Catch-Up Contribution Rules: What Changes Under SECURE 2.0?
Standard Catch-Up Contribution for Age 50 and Older
Under a SECURE 2.0 provision, participants who turn 60 through 63 in 2026 typically qualify for a higher catch-up contribution limit of $11,250, replacing the standard $8,000 catch-up for eligible participants in this age window and bringing their potential total employee contribution to $35,750. Participants who are 64 or older are generally eligible only for the standard $8,000 catch-up limit.
New Roth Catch-Up Rule for Certain Higher Earners
Beginning in 2026, participants whose 2025 wages from their plan’s sponsoring employer exceeded $150,000 usually need to make any catch-up contributions on a Roth basis if the plan offers catch-up contributions (IRS). Roth catch-up contributions are made after tax and generally do not lower current taxable income.
This threshold is generally based on the prior year’s wages from the specific plan sponsor, not on household or total adjusted gross income, and wages from other employers do not count toward it. Because plan administration of this rule can vary, it is worth confirming with your employer how the plan intends to implement the change, especially if you have changed jobs recently or participate in more than one plan.
For example, someone under 50 could generally contribute $4,000 to a traditional IRA and $3,500 to a Roth IRA in the same year, but not $7,500 to each. Contributions also generally cannot exceed the individual’s taxable compensation for the year.
Traditional IRA Contribution Limits
There is usually no income limit for contributing to a traditional IRA. However, income and workplace-plan coverage may affect whether the contribution is fully deductible, partially deductible, or not deductible at all. You typically need to track and report nondeductible contributions on IRS Form 8606.
Roth IRA Contribution Limits
Roth IRA contributions are made with after-tax dollars, so they are not deductible. These contributions can potentially create tax-free income in retirement if you meet the qualified withdrawal rules. Whether you are eligible to contribute to a Roth IRA at all generally depends on your MAGI and filing status.
2026 Roth IRA Income Limits: Who Can Contribute Directly?
Roth IRA eligibility generally phases out based on MAGI. Full contributions are typically allowed below the applicable range, reduced contributions are allowed within it, and no direct contributions are allowed above it.
Note that $153,000 and $242,000 mark the start of the phase-out range, not the cutoff for Roth IRA eligibility.
If your income exceeds the Roth IRA limit, a backdoor Roth IRA strategy may be worth exploring, though pretax IRA balances and the pro-rata rule can complicate the tax result. A Lido advisor can walk through whether that approach fits your broader tax picture before you proceed.
2026 Traditional IRA Deduction Limits: When Is Your Contribution Deductible?
Eligibility to contribute to a traditional IRA and eligibility to deduct that contribution are two separate questions. Even when income limits a deduction, you can generally still make the contribution.
Whether you can deduct your contribution generally depends on your filing status, MAGI, and whether you or your spouse is covered by a workplace retirement plan. If neither spouse has a workplace retirement plan, income-based phase-outs generally do not apply, and contributions are typically fully deductible. Roth IRA contributions are never deductible, since they are made with after-tax dollars.
Nondeductible traditional IRA contributions create an after-tax basis in the account, and mixing deductible and nondeductible funds can complicate future withdrawals and backdoor Roth conversions, so accurate recordkeeping can matter here.
How Much Should You Contribute to Retirement Accounts in 2026?
Reaching the IRS maximum is not always the right goal for every saver. The broader goal is generally to build toward a retirement that is sustainable and aligned with your long-term tax situation, which can be hard to gauge on your own. A practical approach sometimes includes:
Contributing enough to capture the full employer match, which is typically the highest guaranteed return available to a saver.
Maintaining adequate cash reserves and paying down high-interest debt before increasing retirement contributions further.
Setting a sustainable savings rate. Many financial professionals suggest saving around 15% of pretax income, including employer contributions, though the right number varies by individual.
Increasing contributions after a raise, a bonus, or paying off debt, potentially using automatic escalation features where available.
Deciding where additional savings should go, since traditional, Roth, IRA, and taxable investment accounts each carry different tax implications.
The right contribution rate generally depends on your age, retirement timeline, current savings, income stability, and expected future pension or Social Security income.
For example, someone earning $100,000 who targets a 12% savings rate would save $12,000 annually. Paid biweekly across 24 pay periods, that works out to roughly $500 per paycheck, before any employer match.
High earners, in particular, may want to evaluate whether pretax or Roth contributions better fit their projected tax trajectory, rather than defaulting to one type based solely on the limit. This is exactly the kind of decision that can benefit from coordinated tax and investment planning rather than adherence to a general guideline.
How to Approach Your 401(k) Contributions in 2026
Calculate your per-paycheck target. Divide your annual contribution goal by the number of remaining pay periods. To reach the $24,500 limit across 24 biweekly pay periods, for example, an employee under 50 would need to defer roughly $1,020.83 per paycheck.
Review percentage-based elections carefully. If contributions are set as a percentage of pay, variable compensation such as bonuses or commissions can cause actual contributions to differ from your intended dollar amount.
Avoid maxing out too early if your employer matches per paycheck. Some employers match contributions each pay period, so reaching the annual limit early in the year can mean forfeiting match dollars later, unless the plan includes a year-end true-up provision.
Verify catch-up eligibility. Eligible participants aged 60 through 63 in 2026 should confirm that payroll systems are applying the $11,250 higher catch-up limit, rather than the standard $8,000 amount.
Coordinate contributions across multiple jobs. The $24,500 employee deferral limit generally applies to the individual, not to each employer, and changing employers mid-year does not reset it. Exceeding it across multiple plans can create a correctable, but time-sensitive, problem.
Revisit your traditional versus Roth allocation. Both the dollar amount and the tax impact matter. Savers approaching peak earnings years may benefit from prioritizing pretax contributions, while those expecting higher future rates may prefer locking in today’s tax rates with Roth contributions.
What Happens If You Contribute Too Much?
Excess IRA contributions typically result from exceeding the annual limit, contributing more than eligible compensation, making a Roth contribution when MAGI is too high, or miscalculating a reduced contribution within a phase-out range. If you leave an excess contribution uncorrected, the IRS generally applies a 6% excise tax for each year the excess remains in the account. To avoid the excise tax, you generally must remove the excess amount and any related earnings by the tax return due date, including extensions.
Recharacterization may be an available correction in certain IRA situations. Because the rules can be technical, it might be worth working with both the IRA custodian and a tax professional before withdrawing money or moving it between accounts.
Excess 401(k) Deferrals
Excess 401(k) contributions often occur when someone contributes to more than one workplace plan in the same year. To resolve the issue, the participant generally needs to notify the plan administrator and request a corrective distribution of the excess and any applicable earnings.
Excess 2026 deferrals generally need to be resolved by April 15, 2027, and missing that deadline can result in double taxation and other complications. Withdrawing funds independently before confirming the correction procedure with the plan administrator might be a costly mistake, since self-directed withdrawals outside the correction process can create separate tax problems.
Use the Higher 2026 Limits Strategically
The increased 2026 contribution limits give many savers an opportunity to put more toward retirement, but the best strategy is not always as simple as contributing the maximum. Before adjusting your contributions, it is generally worth reviewing your employer’s matching formula, your IRA eligibility, the applicable deduction limits, and the potential tax impact of traditional versus Roth savings. Starting early can also make it easier to spread contributions throughout the year and help prevent last-minute corrections.
At Lido Advisors, we know retirement contribution decisions rarely stand on their own. Through Lido One, we bring together tax planning, investment management, estate planning, and financial planning into a single, coordinated strategy, which can help identify gaps and surface opportunities that are easy to miss when these disciplines are handled separately. If you would like help thinking through how the new 2026 limits fit into your broader plan, contact our team to get started.
Frequently Asked Questions
What is the 401(k) contribution limit for 2026?
The employee elective deferral limit is $24,500. Eligible participants aged 50 or older may generally contribute more through catch-up contributions, either $8,000 for most, or $11,250 for those aged 60 through 63 during 2026.
Can I contribute to both a 401(k) and an IRA in 2026?
Generally, yes. Participating in a workplace plan does not by itself prevent an IRA contribution. However, income and workplace-plan coverage may limit or eliminate a traditional IRA deduction, and income above the Roth IRA phase-out range may prevent a direct Roth IRA contribution.
Is there an income limit for traditional IRA contributions?
Generally, there is no upper income limit on making a traditional IRA contribution for a taxpayer with sufficient eligible compensation. However, income and workplace-plan coverage may reduce or eliminate the deductibility of that contribution.
What is the deadline for making a 2026 IRA contribution?
A 2026 IRA contribution can generally be made through the federal income tax filing deadline, expected to be April 15, 2027, not including extensions. Workplace-plan employee deferrals generally must be made through payroll by the end of the applicable plan year.
Lido One is a single, integrated platform combining all of the outlined services, but not all the services are provided by Lido Advisors, LLC (“Lido”). Lido does not provide legal or tax advice or trustee services. Lido’s affiliates, including, but not limited to, Lido Tax, LLC (“L-Tax”), Enterprise Trust & Investment Company, Enterprise Trust Company (“Enterprise Trust”), and affiliated third-party legal professionals will, upon request, provide formal legal, tax, and/or trustee services for Lido’s clients under separate agreement. Prospects and clients are urged to seek the advice of their own independent counsel or tax professional should such services be required.
These assumptions are theoretical and intended to provide a conceptual framework for understanding how certain investment strategies or models might operate under idealized conditions. These assumptions do not reflect actual market conditions or specific investor circumstances. Hypothetical scenarios may simplify complex market dynamics and investor behaviors. They may not fully capture the impact of variables such as market volatility, liquidity constraints, or transaction costs. The assumptions used may have inherent limitations and may not accurately represent future market conditions or investor experiences. They are designed for illustrative purposes only and should not be interpreted as predictive of actual performance or outcomes.
Lido One is a single, integrated platform combining all of the outlined services, but not all the services are provided by Lido Advisors, LLC (“Lido”). Lido does not provide legal or tax advice or trustee services. Lido’s affiliates, including, but not limited to, Lido Tax, LLC (“L-Tax”), Enterprise Trust & Investment Company, Enterprise Trust Company (“Enterprise Trust”), and affiliated third-party legal professionals will, upon request, provide formal legal, tax, and/or trustee services for Lido’s clients under separate agreement. Prospects and clients are urged to seek the advice of their own independent counsel or tax professional should such services be required.
These assumptions are theoretical and intended to provide a conceptual framework for understanding how certain investment strategies or models might operate under idealized conditions. These assumptions do not reflect actual market conditions or specific investor circumstances. Hypothetical scenarios may simplify complex market dynamics and investor behaviors. They may not fully capture the impact of variables such as market volatility, liquidity constraints, or transaction costs. The assumptions used may have inherent limitations and may not accurately represent future market conditions or investor experiences. They are designed for illustrative purposes only and should not be interpreted as predictive of actual performance or outcomes.
