Your nest egg just got a little bigger.
Starting next year, Americans will be able to contribute up to $25,500 to their 401(k) accounts, an increase of $1,000 from $24,500 in 2026. This gives workers more room to save for retirement through their employers.
Depending on tax circumstances, Americans can get more money for retirement while potentially reducing their taxable income — and they just need to change one number through their online investment portal.
“Along with tax cuts for working families, this increase in retirement limits will help American families keep more of their hard-earned income,” IRS CEO Frank J. Bisignano said in a press release. “With the new adjustment in place, the IRS is giving taxpayers and employers the information needed to make retirement planning decisions for the coming year.”
This change does not mean that people will receive $1,000 from the government. The move simply allows Americans to contribute more of their own money to tax-advantaged retirement accounts.
According to the IRS, the annual contribution limit applies to the following:
- 401(k) plans
- 403(b) plans (common for teachers and nonprofit employees)
- Government Plans 457 (for state and local government employees)
- Federal Savings Plans (for Federal Workers)
Older workers can also start saving more, as people aged 50 and over will now be able to make additional contributions, known as catch-up contributions. This means that people aged 50 and over will see a contribution limit of $34,000, an increase of $1,500.
People ages 60 to 63 can now contribute $37,250, also an increase of $1,500.
Those with an IRA — a retirement savings account that people can open on their own rather than an employer-sponsored plan — won’t see any changes.
The IRS said the annual contribution limit remains:
- Under 50: $7,500
- 50 years and over: $8,600 ($7,500 plus the catch-up contribution of $1,100)
Earlier this month, the agency released new tax brackets for 2027, which raise the income thresholds for each level after inflation grows. Additionally, the standard deduction – the portion of income that is not taxed – will also get a slight increase, up to $16,600 for individuals and up to $33,200 for married couples filing jointly.
The move marks a $500 increase in the deduction for singles and a $1,000 increase for married couples filing together.
Additionally, the income threshold for each tax bracket increased from approximately 3.22% to 3.25%, to account for inflation.
The brackets determine how much income tax workers owe, rising from a rate of 10% for the lowest tier to 37% for the richest.
The child tax credit – which allows filers with children to reduce their tax liability – gets a $100 increase, to $2,300.
Because of all the changes heading into the new year, be sure to track your accounts in April.
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