2026 Retirement Plans Limits! How to use your 401(k) and Roth IRA

With tax season coming to a close, it’s a great time to review your retirement plan contributions and make adjustments for the current year. Here are some things to note as we head into the rest of 2026 to maximize tax-advantaged savings.

Retirement contribution limits have increased, creating a valuable opportunity to get closer to your long-term savings goals. Whether you’re contributing through your workplace plan or on your own, understanding how these limits apply can help you make smarter decisions about where each dollar goes.

First, it’s important to understand that there are different rules regarding contribution limits for company retirement plans like your 401(k) and individual retirement accounts (IRAs).  You may have access to one or the other or both, so knowing the rules for separating and stacking your retirement contributions is important.

If you are covered under a company plan like a 401(k), here is what you need to know:  For 2026, the contribution limit for 401(k) plans (including both Traditional and Roth 401(k) contributions) has increased to $24,500.  If you are over age 50, you can make catch-up contributions on top of this: $8000 or if you are between 60-63 up to $11,250.

(***Also, there is a new rule for 2026: If you made $150k or above in 2025, your catch-up contribution has to be a Roth contribution. See your 401(k) plan for how they are handling this if this rule applies to you.)

IRA contributions for 2026 (Roth and Traditional combined) are capped at $7,500. Again, if you are over the age of 50, you can make additional catch-up contributions of $1,100 for a total limit of $8,600.

A quick reminder that when it comes to Roth contributions, the biggest distinction between a Roth 401(k) contribution and a Roth IRA is access and eligibility. A Roth 401(k) is available through your employer and has no income limits, meaning high earners can contribute the full amount. This makes it one of the most powerful tools for building tax-free retirement income. On the other hand, a Roth IRA has income eligibility restrictions, which may limit or eliminate your ability to contribute directly depending on your earnings. However, it offers greater flexibility because you can withdraw your contributions at any time, and there are no required minimum distributions in retirement. For many investors, the question isn’t which Roth account is better, it’s how to use both effectively.

If you have access to both a Roth 401(k) and a Roth IRA, it’s important to understand that their contribution limits are separate, not shared. This means you can contribute up to $24,500 to your 401(k) and up to $7,500 to an IRA in the same year, assuming you meet income eligibility for the Roth IRA. In practice, many investors use this to their advantage by first contributing enough to their 401(k) to receive the full employer match, then funding a Roth IRA for added flexibility. After that, any additional savings can go back into the Roth 401(k) to maximize total tax-advantaged contributions.

Ultimately, 2026’s increased limits present a chance to be more intentional with your savings strategy. Prioritizing Roth contributions, whether through a 401(k), an IRA, or a combination of both, can help you build a more tax-efficient retirement and give you greater flexibility when it comes time to draw on those funds.

Click here to download a quick tax reference sheet to income and contribution limits for 2026.

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Centered Financial, LLC is a registered investment adviser offering advisory services in the State of California, Utah, Texas and in other jurisdictions where exempted. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques, strategies, or investments discussed are suitable for all investors or will yield positive outcomes. To determine which strategies or investment(s) may be appropriate for you, consult your financial adviser prior to investing. Any discussion of strategies related to tax or legal planning is general and is not intended as tax or legal advice. Please consult appropriate tax and legal professionals for recommendations pertaining to your specific situation.