The IRS released Notice 2025-67, announcing the retirement plan limits for 2026. Almost all categories increased from the 2025 limits, allowing clients to add more to their retirement savings. While annual increases are expected, the 2026 updates arrive at a time when contribution decisions are becoming more nuanced due to expanded catch-up rules and mandatory Roth treatment for certain participants.
As you help clients plan contributions for the year ahead, a key consideration for 2026 is how these changes affect both how much clients can contribute and the types of accounts to which those contributions can be made. In many cases, higher limits do not simply mean contribute more, but instead require a discussion surrounding trade-offs, tax treatment, and whether making the contribution is advantageous at all.
Helping clients understand not just what they can contribute, but whether they should, is where effective advice can make the greatest difference.
This article focuses on defined contribution plan types and highlights the planning decisions advisors should be prepared to address with clients.
The annual limit on elective deferrals to 401(k), 403(b), governmental 457(b), and Thrift Savings Plans increased from $23,500 in 2025 to $24,500 in 2026. For many clients, this increase creates additional opportunities to save and is a reminder about coordination across multiple plans.
Help clients navigate aggregation rules
Elective deferrals to 401(k), 403(b), and Thrift Savings Plans (TSPs) are subject to a per-person limit. Regardless of how many of these plans a client participates in, their combined elective deferrals to all such plans cannot exceed $24,500 for 2026.
Elective deferrals to governmental 457(b) plans are not aggregated with deferrals to 401(k), 403(b), or Thrift Savings Plans. As a result, contributions to those plans do not reduce the amount a client can defer to a governmental 457(b) plan.
This distinction remains one of the most powerful, and often overlooked, planning opportunities for public-sector employees.
Advisors should not assume clients understand these aggregation rules. Many believe each plan has its own independent limit, which can lead either to underfunding or excess deferrals that require correction.
Example 1: Maria participates in a 401(k) and a 403(b)
Forty-five-year-old Maria is employed full-time by a private corporation that sponsors a 401(k) plan and works part-time for a nonprofit organization that offers a 403(b) plan.
For 2026, Maria wants to maximize her salary deferrals.
Because elective deferrals to 401(k) and 403(b) plans are subject to a single, per-person limit, Maria’s combined deferrals to both plans cannot exceed $24,500 for the year. If she defers $15,000 to her employer’s 401(k), she may defer no more than $9,500 to the 403(b).
Even though Maria participates in two unrelated employer-sponsored plans, the elective deferral limit applies to both plans in the aggregate. This aggregation is often a surprise to clients and reinforces the importance of advisor oversight when multiple plans are involved.
Example 2: James participates in a 401(k) and a governmental 457(b)
Fifty-year-old James works for a public university that sponsors both a 403(b) plan and a governmental 457(b) plan. In addition, he works for a private corporation that sponsors a 401(k) plan.
For 2026, James may defer up to $24,500 in total across his 401(k) and 403(b) plans. Those deferrals are aggregated and share a single elective deferral limit.
However, James may also defer an additional $24,500 to the governmental 457(b) plan. Deferrals to the 457(b) are not aggregated with deferrals to the 401(k) or 403(b).
As a result, James could defer up to $49,000 in elective deferrals for 2026, assuming the plans permit those deferrals and he has sufficient compensation from each employer. For eligible clients, this distinction materially changes the potential for retirement accumulation.
Because James is age 50 in 2026, he may also be eligible to make catch-up contributions separately under each plan: catch-up contributions under the 401(k) and/or 403(b) does not reduce the catch-up available under the governmental 457(b).
Key reminder for clients: Advisors should encourage clients who participate in plans with elective deferrals to confirm with their employers how much they are permitted to defer. For example, while the statute allows $24,500 for regular salary deferrals, a plan may be designed to limit deferrals below that amount, often based on compensation levels or highly compensated employee status.
Standard and enhanced catch-up amounts
One of the most significant developments in recent years is the expanded age-based catch-up provision introduced by SECURE 2.0, particularly for participants ages 60 through 63. Catch-up provisions allow eligible plan participants to make salary deferral contributions beyond the regular elective deferral limit and allow for even higher catch-up amounts for those in this age group.
For 2026, the catch-up amounts are as follows:
- Ages 50 through 59, and age 64 and older: $8,000 for 2026, increased from $7,500
- Ages 60 through 63: $11,250, unchanged from 2025
These distinctions require more careful monitoring of participant age than in prior years. Advisors should confirm that clients understand which catch-up tier applies to them and that payroll systems are applying the correct limit.
Why the expanded catch-up matters
A Fidelity report showing that many individuals ages 60-64 have average retirement savings of less than $250,000 highlights the importance of the enhanced catch-up opportunity. For clients who reach their early sixties without adequate retirement savings, the “super catch-up” provides a narrow but meaningful window to increase contributions.
For many clients, these years coincide with peak earning periods, reduced family expenses, or the final years before retirement planning shifts from accumulation to distribution. Advisors can add significant value by helping clients evaluate whether maximizing these catch-up amounts aligns with their broader retirement and tax planning goals.
Mandatory Roth catch-up requirement
A critical SECURE 2.0 provision becomes effective in 2026. Catch-up contributions for participants whose prior-year W-2 wages exceed $150,000 must be made as Roth contributions.
Notice 2025-67 updates this wage threshold from $145,000 in 2025 to $150,000 for 2026.
This Roth mandate is one of the most consequential changes for affected clients. The decision is no longer simply whether to make catch-up contributions. It is now also a question of whether to make contributions using amounts that have already been taxed.
For these individuals, the choice is effectively between Roth and none, as the ability to defer taxes on catch-up contributions is no longer available. Instead, catch-ups are directed into the client’s tax-free income bucket via their designated Roth account.
This Roth mandate may be attractive for clients who value future tax-free income or who expect higher tax rates in retirement.
For others, particularly those who have historically prioritized reducing current taxable income, this requirement may change contribution behavior. Some clients may elect not to make catch-up contributions at all, even if they are otherwise eligible.
Defined contribution annual additions
The overall defined contribution plan limit, which caps the aggregate of employer and employee contributions, increased to $72,000 for 2026, up from $70,000 in 2025. This limit does not include catch-up contributions.
This annual addition limit applies on a per-employer basis. As a result, a client who works for two unrelated employers could potentially have total contributions of $144,000, assuming the companies are unrelated and unaffiliated and the client has sufficient compensation from each employer.
Because this limit applies on an employer-by-employer basis, there is generally little risk of exceeding it when a client works for two unrelated employers. However, the analysis becomes more complex when ownership by common individuals or entities is involved.
If a client works for two businesses with common ownership, the companies may be treated as a controlled group or affiliated service group. In those cases, the businesses could be treated as one employer for contribution purposes. Clients in these situations should consult with a qualified attorney or CPA to determine whether aggregation rules apply.
Annual compensation cap
The annual compensation limit used to determine retirement plan contributions increased from $350,000 in 2025 to $360,000 in 2026, per employer.
For example, if a client earns $400,000 from one employer, the plan may use no more than $360,000 of that compensation when calculating contributions for 2026. This cap can affect employer matching contributions, profit-sharing allocations, and overall funding strategies for employees.
Communication is key to client success
Many clients are unaware of these annual changes and how they affect their contribution opportunities. Now is an ideal time to remind clients of the updated limits and explain how the changes affect their current and future retirement planning.
Communication should be tailored. The conversation with a catch-up-eligible client who earned up to $150,000 will differ from the conversation with a client who exceeds that threshold. In one case, the catch-up is optional and flexible. In the other, the catch-up decision is mandatory in form and conditional in substance.
For clients subject to the Roth catch-up requirement, the discussion often comes down to whether making the contribution makes sense at all.
Helping clients understand not just what they can contribute, but whether they should, is where effective advice can make the greatest difference.