IRS Announces 2026 Cost-of-Living Adjustments for Retirement Plans

On November 13, 2025, the Internal Revenue Service (IRS) issued Notice 2025-67, detailing the calendar year cost-of-living adjustments (COLAs) for tax-qualified retirement plans for 2026. These adjustments reflect changes in inflation and update contribution and compensation limits for various retirement savings options.

The elective deferral limit for both 401(k) and 403(b) plans will rise to $24,500 in 2026. Additionally, employees will see an increase in the catch-up contribution limit, which will reach $8,000 for most individuals. However, for employees aged between 60 and 63 during 2026, this limit will remain at $11,250.

Another significant adjustment is the limitation on compensation that can be considered under these retirement plans, which will increase to $360,000 for the year. The threshold used to classify highly compensated employees will hold steady at $160,000. Notably, the threshold for determining highly paid individuals regarding the Roth catch-up contribution requirement will increase from $145,000 to $150,000 for the 2025 lookback year.

Annual Adjustments Reflect Inflation Trends

The adjustments announced for 2026 are consistent with the increases made for the previous year, indicating a steady response to ongoing inflationary pressures. Each limit is rounded to a whole number, typically the nearest $500 or $1,000, as mandated by law. These adjustments will take effect on January 1, 2026.

The IRS annually reviews these limits to ensure they align with economic conditions, helping to safeguard the retirement savings of millions of individuals across the United States. By responding to inflation, the IRS aims to maintain the purchasing power of retirement contributions, which is essential for long-term financial planning.

As individuals prepare for their financial futures, the updated contribution limits provide opportunities for enhanced savings in retirement plans. It is crucial for employees and employers alike to stay informed about these changes to maximize the benefits of tax-qualified retirement plans.