Understanding Retirement Contribution Limits: A Guide to Your Financial Future
- GreenMusaCapital
- Oct 16, 2025
- 2 min read
Updated: Nov 14, 2025
The Internal Revenue Service (IRS) imposes annual limits on how much employers and employees can contribute to retirement plans (or IRAs). These limits can vary based on the type of plan and may change each year.
Are you wondering if you are on track to retire? Use our easy Retirement Calculator to see how your savings stack up.
Contribution Limits for Elective Deferrals & Catch-Up Contributions
These contributions come from an employee’s salary, whether pre-tax, Roth, or elective deferrals. Understanding these limits is crucial for effective retirement planning.
Plan Type | 2026 Basic Elective Deferral Limit* | Catch-Up Contribution (Age 50+) | Notes / Special Limits |
401(k), 403(b), non-SIMPLE plans, governmental 457(b) | $24,500 | + $8,000 | -- |
SIMPLE IRA / SIMPLE 401(k) | $17,000 | + $3,500 | Under SECURE 2.0, for certain SIMPLE plans higher limits may apply. |
Governmental 457(b) (special) | $23,000 | Catch-up allowed (if plan permits) | There is also a special 457-plan “pre-retirement” catch-up for 3 years before normal retirement age. |
Or 100% of compensation, whichever is less
Additional Notes on Catch-Up Limits
For 401(k) and similar plans, under SECURE 2.0, participants aged 60–63 may qualify for a higher catch-up limit. That higher catch-up amount is $11,250.
For SIMPLE plans, a “super” catch-up may apply, depending on plan rules.
Starting in 2026, participants age 50+ earning over the threshold must make catch-up contributions as Roth.
Defined Contribution / Employer & Combined Limits
These limits govern the total contributions (employee + employer) to defined contribution plans.
Year | Defined Contribution Limit (excl. catch-up) | Maximum Compensation Used for Limit Calculations* |
2026 | $72,000 | $360,000 |
Compensation subject to limit when determining contributions
SEP Contributions (Employer-Only)
SEP plans are funded solely by the employer. The limit is the lesser of 25% of compensation or the defined contribution limit.
Year | SEP Contribution Limit | Percentage of Compensation | Employer Compensation Cap |
2026 | $72,000 | Up to 25% of employee compensation | $360,000 |
IRA Contribution Limits (Traditional & Roth)
Understanding IRA limits is essential for your retirement strategy.
Year | IRA Contribution Limit (All IRAs combined) | Catch-Up (Age 50+) |
2026 | $7,500 | + $1,100 |
(Subject to compensation and income phase-outs for tax deductibility or Roth eligibility)
Conclusion & Tips for Your Retirement Planning
Stay Informed: Limits adjust each year. Always check for current-year figures.
Catch-Up Contributions: These are additional allowances for those aged 50+. Some newer rules, like SECURE 2.0, may allow higher catch-up amounts for those aged 60–63.
Combined Limits Matter: If you participate in multiple plans in a year, your total elective deferrals must not exceed the base limit.
Plan-Specific Rules: Some plans may impose lower limits or disallow certain catch-up features.
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