IRS updates 2026 retirement plans: 401(k) limit now $24,500, IRA rises to $7,500
On November 13, 2025, the IRS issued Notice 2025-67, setting new cost-of-living adjusted limits for retirement plans and IRAs for tax year 2026.
The notice touches almost every corner of the retirement system – from 401(k) contribution limits and 457 plans to SIMPLE plans, IRAs, savers’ credit thresholds, and compensation caps used in plan testing. Most amounts increase to keep pace with inflation, giving savers slightly more room to set money aside.
In this news piece, we break down the headline numbers and the income ranges most likely to affect individuals, employers, and US expats.
Key takeaways
- The annual benefit limit for defined benefit plans rises to $290,000, and the defined contribution plan limit rises to $72,000 in 2026.
- The elective deferral limit for 401(k), 403(b), Thrift Savings Plan, and many 457 plans increases to $24,500, with an age 50+ catch-up of $8,000 for most employer plans.
- Income limits for the saver’s credit and key compensation thresholds – such as the highly compensated employee and key employee definitions – move up, which is especially important for high earners and plan design.
This article is brought to you by Taxes for Expats (TFX), your trusted partner for up-to-date tax insights and practical filing support. We help you make sense of complex changes like the 2026 retirement plan limits and IRA adjustments, and show how they fit into your US tax filing – especially if you live abroad. Learn more about our services or contact us to get started.
What Notice 2025-67 changes for 2026
Notice 2025-67 updates many dollar limits at once. The biggest shifts appear in workplace retirement plans, IRA rules, and saver's credit income levels.
Headline limits for workplace retirement plans
Workplace plans include defined benefit pensions, defined contribution plans, 401(k) limits and 403(b) plans, SIMPLE plans, and certain 457 arrangements. For 2026, core caps and catch-up amounts rise, while a few special figures stay the same.
Defined benefit and defined contribution plans
- Defined benefit limit: increases to $290,000 (from $280,000).
- Defined contribution limit: increases to $72,000 (from $70,000).
- For participants who separated before 2026: the prior limit is multiplied by 1.0288.
These limits set the maximum benefit or annual additions a plan may credit to a participant.
Elective deferrals, 457 plans, and catch-ups
For 2026, the elective deferral limit increases to $24,500 (up from $23,500). This cap applies to:
- 401(k) plans
- 403(b) plans
- Governmental 457 plans
- Federal Thrift Savings Plan
The age-50+ catch-up increases to $8,000, while the enhanced $11,250 catch-up for ages 60–63 remains unchanged. The Roth catch-up wage threshold increases to $150,000.
SIMPLE plans and starter plans
SIMPLE plans and starter deferral-only plans keep their own structure but see higher key amounts.
- SIMPLE salary reduction limit: $17,000
- Higher SIMPLE limit: $18,100
- Age-50+ SIMPLE catch-up: $4,000
- Ages 60–63 SIMPLE catch-up: $5,250
- Additional SIMPLE catch-up that remains unchanged: $3,850
Starter 401(k)/403(b) deferral-only plans keep the $6,000 limit, with a $1,100 catch-up for age 50+.
2025 vs 2026 workplace plan limits
| Item | 2025 limit | 2026 limit |
|---|---|---|
| Defined benefit annual benefit limit | $280,000 | $290,000 |
| Defined contribution annual additions limit | $70,000 | $72,000 |
| 402(g) elective deferrals (401(k), 403(b), TSP) | $23,500 | $24,500 |
| 457 plan deferrals | $23,500 | $24,500 |
| Age 50+ catch-up (most employer plans) | $7,500 | $8,000 |
| SIMPLE salary reduction – main limit | $16,500 | $17,000 |
| SIMPLE higher limit | $17,600 | $18,100 |
| SIMPLE age 50+ catch-up | $3,500 | $4,000 |
| Starter 401(k)/403(b) deferral limit | $6,000 | $6,000 (+$1,100 at 50+) |
IRA contribution and income limits for 2026
Alongside workplace plans, Notice 2025-67 updates the basic IRA limits and the income ranges that determine who can deduct a traditional IRA or contribute to a Roth IRA.
Traditional IRA contributions and phase-outs
The deductible IRA contribution limit under section 219(b)(5)(A) will rise from $7,000 to $7,500 for 2026, giving savers a little more room to set money aside. For those age 50 or older, the IRA catch-up amount under section 219(b)(5)(B)(ii) also increases – moving from $1,000 to $1,100 for the year.
For 2026 traditional IRA deductions, the key income ranges are:
- Single / HOH covered by a plan: $81,000–$91,000
- MFJ (contributing spouse covered): $129,000–$149,000
- MFJ (contributor not covered, spouse covered): $242,000–$252,000
- MFS covered: $0–$10,000
These ranges decide how much of a traditional IRA contribution is deductible when a workplace plan is in the picture.
Roth IRA income limits and phase-outs
Roth IRA rules use similar income bands, but they control contribution eligibility rather than deductibility. For 2026:
- MFJ: limit rises to $242,000
- Single / HOH: limit rises to $153,000
- MFS: unchanged at $0
The 2026 Roth IRA phase-out ranges are:
- MFJ: $242,000–$252,000
- Single / HOH: $153,000–$168,000
- MFS: $0–$10,000
Together, these IRA and Roth updates raise the ceiling on tax-favored saving and ease the income squeeze for some households.
Saver’s credit and key compensation thresholds
Beyond contribution caps, Notice 2025-67 adjusts the income lines for the retirement savings contributions credit and several compensation thresholds used across retirement and fringe benefit rules.
The saver’s credit under section 25B uses different income bands for each filing status. For 2026, the upper limits are:
- MFJ: $48,500 / $52,500 / $80,500
- HOH: $36,375 / $39,375 / $60,375
- Single / MFS: $24,250 / $26,250 / $40,250
Higher thresholds mean more filers can still claim some level of saver’s credit as income rises.
Compensation caps and employee status thresholds
Together with the saver’s credit levels, these thresholds shape who is treated as highly paid, who qualifies for extra credits, and how much compensation can be counted inside retirement plans.
- Highly compensated employee (HCE): $160,000 (unchanged)
- Key employee threshold: $235,000
- General annual compensation limit: $360,000
- Governmental plan compensation limit: $535,000
- SEP threshold: $800
- Control employee compensation: $145,000 / $290,000
- Small employer pension credit compensation limit: $110,000
These limits influence plan eligibility, testing rules, and compensation calculations for retirement purposes.
Also read. Self-Directed IRA (SDIRA)
What the 2026 retirement limits mean for US expats
Notice 2025-67 does not single out expats, but the updated limits apply to US citizens and residents regardless of where they live. For Americans abroad who still have access to US retirement plans or IRAs, the 2026 increases can change how much they can set aside and how their income interacts with phase-out rules.
US expats who stay on a US payroll or work for employers that sponsor US-qualified plans may be able to:
- Defer up to $24,500 into a 401(k), 403(b), TSP, or similar plan, plus catch-ups if eligible.
- Use the higher SIMPLE limits – $17,000 basic and $4,000 catch-up – when working for small employers.
- Contribute up to $7,500 to an IRA (plus $1,100 for age 50+).
High-earning expats may be affected by the higher 2026 limits for highly compensated and key employees, since these rules can change how a plan counts their pay and how benefits are tested. These updates give expats more room to save, but also make it important to know where their income sits when choosing between a traditional IRA, a Roth IRA, or the saver’s credit.
What to keep in mind as you plan for 2026
The 2026 limits give US expats more room to save, with higher caps and wider income bands that support stronger year-ahead planning. These updates shape how much you can contribute to US plans, how your income fits into IRA and Roth rules, and how your long-term savings grow while living abroad. With a clear view of the updated numbers, it becomes easier to avoid phase-out surprises and choose the right mix of accounts.
At Taxes for Expats, we can help you understand how these updates fit into your expat taxes – wherever you live – and show you the best way to use the new limits to your advantage.
News items like this may not be updated after their release, so please check the publication date before relying on any figure or language for your tax planning.
