Optimizing Retirement Savings in the New Year

Happy New Year! This is the time of year when many of us are taking stock of our routines and committing to new and improved habits.  Not only is it a great time to commit to healthier eating and exercising more, but January is also a great time to review your retirement savings plan!  Are you on track to meet your goals?  If not, what will it take to get there?

For those who are contributing the maximum allowed by law to their retirement or health savings plans, note that the IRS raised contribution limits in 2026 for most types of accounts, and they are implementing a new rule for catch-up contributions, as described below.

IRA contribution limits

• Traditional or Roth IRA contribution:  increased to $7,500
• Catch-up contribution for those 50 and over:  increased to $1,100
• SEP IRA contribution:  increased to $72,000

401K, 403b and most 457 plan contribution limits

• Employee contribution:  increased to $24,500
  • Catch-up contribution for those 50 and over:  increased to $8,000*
  • Super catch-up contribution for those 60 to 63:  remains at $11,250*

Flexible Spending Account (FSA) contribution limits         

• Employee contribution:  increased to $3,400
• Carry over amount:  increased to $680

Health Savings Account (HSA) contribution limits

• Self-Only coverage:  increased $100 to $4,400
• Family coverage:  increased $200 to $8,750
• Catch-up contribution for those 55 and over:  remains at $1,000

*Note that, starting this year, any catch-up contributions for those over 50 years old to 401k, 403b, or 457b accounts will now have to be made to the Roth version of their employer-sponsored retirement plan for high income employees.  High income employees are defined as those who earned more than $150,000 in FICA wages for that employer in the previous year.  (Check Box 3 of your W-2 for your FICA wage amount in 2025.)  This new provision may change whether it is advantageous for high income earners to make catch-up contributions to their retirement accounts at all, so if you are impacted by this change, please reach out to us at PFS so we can discuss the best strategy.

If you have any questions about your retirement savings plan or any other financial issues in the new year, please do not hesitate to call or e-mail any time.