The IRS has released its annual inflation adjustments, and workers saving for retirement through a 401(k) just got more room to stash cash.
For 2026, the employee contribution limit rises to $24,500, up from $23,500 in 2025.
It's the second straight year of increases, driven by the same inflation formula that governs Social Security and tax brackets.
The catch-up contribution for workers 50 and older stays at $8,000, but a special higher catch-up for those aged 60 through 63 remains in place at $11,250.
That "super catch-up" was introduced under SECURE 2.0 and is designed to let near-retirees pack away more in their final working years.
Total contributions — including employer matches — also move up.
The combined limit for employee plus employer money climbs to $72,000 for 2026, up from $70,000.
If you're lucky enough to have a generous match, that ceiling matters just as much as the employee limit.
Why should this matter to the average worker?
Because most people never come close to maxing out.
Vanguard data has shown for years that a large share of savers contribute well under the cap, often leaving free employer match money on the table.
If your employer matches 50 cents on the dollar up to 6% of pay, contributing only 3% means you're turning down part of your compensation.
There's another angle: the limit is per person, not per household.
A married couple where both spouses work can each contribute up to the employee max, meaning a two-income household could shelter $49,000 in 2026 before any employer match.
That's a meaningful chunk of tax-advantaged savings that many families overlook.
Roth 401(k) contributions share the same limits as traditional ones.
So if you prefer paying tax now for tax-free withdrawals later, the new number applies to you too.
One practical tip: don't wait until December to adjust your deferral percentage.
Payroll systems can be slow, and if you front-load too aggressively you might miss out on employer match in later months due to plan rules.
Spreading contributions evenly across the year is usually the safer play.
Also worth noting: the IRA limit is separate and unchanged at $7,000 for 2026, with a $1,000 catch-up.
So a worker maxing out both a 401(k) and an IRA could set aside $31,500 of their own money next year — plus catch-up amounts if eligible.
The bottom line is that a higher limit is only useful if you actually use it.
Even a small bump in your deferral percentage — say, one or two points — can compound into real money over a couple of decades.
Final Thoughts
Check your plan's rules, look at your budget, and consider nudging that number up when open enrollment or your next paycheck cycle comes around.