Your year in review: What's working and what’s next?

2026 Retirement Reforms

The start of 2026 marks the full implementation of several key provisions from the SECURE 2.0 Act, enacted in 2022 to bolster retirement security. Contribution limits for 401(k), 403(b), and similar plans have climbed to $24,500 for those under 50, with catch-up contributions for those 50 and older rising to $8,000. A 'super catch-up' for ages 60 to 63 allows an extra $11,250, pushing potential totals to $35,750. IRA limits are now $7,500, with an additional $1,100 catch-up for older savers.

High earners—those with over $150,000 in FICA wages from the prior year—must now direct catch-up contributions to Roth accounts, forgoing immediate tax deductions in favor of tax-free withdrawals later. This shift affects about 10% of plan participants but alters planning for executives and professionals. Meanwhile, Social Security adjustments include a 2.8% COLA, lifting average retirement benefits to $2,071 monthly, and raising the wage base for taxes to $184,500, up from $176,100.

These changes arrive amid economic headwinds: inflation has eased but still outpaces wage growth for many, with basic expenses rising faster than incomes. Younger workers, particularly millennials and Gen Z, face competing priorities like student debt and housing costs, leading to higher plan leakage—early withdrawals that incur penalties. Employers are responding by enhancing plans with emergency savings features and student loan matching, as allowed under SECURE 2.0.

Stakes are concrete: missing the December 31 deadline for 2026 contributions forfeits tax-advantaged growth; for a high earner, that could mean $8,000 less compounding over decades. The new Roth mandate risks higher current taxes without action, potentially adding $2,000 to $5,000 in annual liabilities depending on brackets. Inaction amplifies consequences, like reduced benefits for the 40% of employees living paycheck-to-paycheck, or eroded purchasing power for retirees facing Medicare premium hikes.

Non-obvious tensions emerge between stakeholders. Plan sponsors must amend documents by December 31, 2026, or face compliance fines up to $10,000, pressuring small businesses. High earners gain from Roth's elimination of required minimum distributions (RMDs) in 401(k)s, but lower-income savers might overlook the senior deduction—$6,000 for those 65+, phasing out at $75,000 MAGI for singles—missing out on $1,200 in tax savings at a 20% rate. Broader trade-offs include favoring Roth conversions now, amid quadrupled SALT caps to $40,000 through 2028, versus waiting for potential rate hikes post-2028.