Retirement Planning Guide with 2025 and 2026 Updates
Crafting a Future-Proof Retirement Strategy with the Latest Regulations
Key Changes for 2025
1. Increased Contribution Limits
- 401(k), 403(b), 457, and TSP Plans: Employees can contribute up to **23,500∗∗in2025(upfrom23,500∗∗in2025(upfrom23,000 in 2024). Those aged 50+ can add a 7,500catch−up∗∗,foratotalof∗∗7,500catch−up∗∗,foratotalof∗∗31,000. For workers aged 60–63, a “super catch-up” allows an extra 11,250∗∗,pushingthetotalto∗∗11,250∗∗,pushingthetotalto∗∗34,750 1411.
- IRAs: The contribution limit remains **7,000∗∗(7,000∗∗(8,000 with the $1,000 catch-up for those 50+) 49.
- SIMPLE IRAs: Employee deferrals rise to 16,500∗∗,witha∗∗16,500∗∗,witha∗∗5,250 catch-up for those aged 60–63 (total: $21,750) 111.
2. Auto-Enrollment Mandate
New 401(k) plans established after December 29, 2022, must auto-enroll employees starting in 2025. Contributions begin at 3–10% of salary, increasing by 1% annually until reaching 10–15%. Exceptions apply for small businesses (<10 employees) and SIMPLE 401(k)s 1811.
3. Inherited IRA Rules Tighten
Beneficiaries of IRAs inherited after 2019 must now take annual required minimum distributions (RMDs) during the 10-year withdrawal period. The IRS delayed penalties for noncompliance until 2026 1211.
4. Roth 401(k) RMDs Eliminated
Starting in 2024, Roth 401(k)s no longer require lifetime RMDs, aligning them with Roth IRAs. This allows tax-free growth to continue indefinitely 28.
5. 529-to-Roth Rollovers
Unused 529 plan funds can now be rolled into a Roth IRA (lifetime limit: $35,000) if the account is at least 15 years old and meets income requirements 28.
Major Updates for 2026
1. Roth-Only Catch-Up Contributions for High Earners
Under SECURE 2.0, employees aged 50+ earning over $145,000 (indexed for inflation) must make catch-up contributions to Roth accounts (after-tax). Pre-tax catch-ups are banned for this group, reducing tax deferral benefits for high-income savers 235.
2. Inherited IRA Penalties Begin
The IRS’s transitional relief for missed RMDs on inherited IRAs expires in 2026. Beneficiaries who fail to comply will face a 25% penalty (reducible to 10% if corrected promptly) 111.
3. Inflation Adjustments
- The $145,000 income threshold for Roth catch-ups will adjust for inflation, potentially affecting more workers over time 312.
- SIMPLE IRA catch-up limits for those aged 60–63 will also see inflation-based increases starting in 2026 11.
4. Student Loan Matching
Employers can now match student loan payments with retirement contributions, effective 2024. This helps younger workers balance debt and savings 8.
5. Retirement “Lost and Found” Database
A federal database launched in 2024 allows individuals to track old 401(k)s and pensions. By 2026, this tool is expected to be fully operational, reducing unclaimed retirement funds 11.
Strategic Takeaways
- Maximize 2025 Catch-Ups: Workers aged 60–63 should leverage the $11,250 super catch-up in 401(k)s 411.
- Roth Conversions: High earners should consider shifting to Roth accounts before 2026 mandates take effect 712.
- Review Inherited IRAs: Ensure compliance with RMD rules to avoid penalties starting in 2026 111.
- Small Business Compliance: Employers must update auto-enrollment systems and payroll processes for new SECURE 2.0 rules 13.
Visual Summary
| Year | Key Change | Impact |
|---|---|---|
| 2025 | Higher 401(k) limits + auto-enrollment | Save up to $34,750 (60–63 age group); employers adapt payroll systems |
| 2026 | Roth-only catch-ups for high earners | Reduced tax flexibility for executives; Roth strategies gain importance |
| 2026 | Inherited IRA penalties enforced | Stricter RMD compliance required to avoid 25% penalties |
Final Tip
Stay proactive! Consult a financial advisor to navigate these changes and optimize contributions, tax strategies, and legacy planning. For detailed IRS guidelines, review Notice 2024-80