In a significant update for retirement savers, the IRS has revealed an increase in the elective deferral limit for 401(k) plans, effective for the 2026 fiscal year. As enthusiastically stated in the publication, this adjustment aims to enhance the savings potential for employees planning for their future.
Increase in Elective Deferral Limit
The elective deferral limit will rise to $24,500, allowing employees to contribute more towards their retirement accounts. This increase is particularly beneficial for those looking to bolster their savings as they approach retirement age.
New Total Annual Addition Limit
Moreover, the total annual addition limit has also been raised to $72,000. This change not only encourages higher contributions but also offers participants a chance to significantly reduce their current taxable income, making it a strategic move for long-term financial planning.
Recently, the IRS proposed tax reforms that could significantly affect sovereign wealth funds in the U.S., contrasting with the recent increase in 401(k) contribution limits. For more details, see proposed reforms.
