Taxes, Retirement and What’s Ahead in 2026

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As we bid farewell to 2025 tax year filings (mostly), at Sterling, we have our eyes firmly on the road for 2026 planning opportunities. There are changes to be aware of, as well as smart tax related decisions to make in the year ahead.

Tax Law Provision Changes: A Quick History

2026 is a year of implementation of a myriad of tax law changes from both the 2022 Secure Act 2.0 and the 2025 One Big Beautiful Bill Act (OBBBA). While OBBBA lies more freshly in our minds, the Secure Act 2.0 was passed four years ago, and we thought it would be helpful to revisit some of the key provisions that are now in front of us for 2026.

The Secure Act 2.0 included ninety provisions incentivizing saving for retirement. These provisions have been implemented gradually since 2023, building a ladder of increased savings options, deferral limits, raising the age retirees are forced to begin retirement benefits and more.

What’s In Store for 2026?

The OBBBA provides:

  • Slightly higher standard deductions for Single taxpayers ($16,100), those Married Filing Jointly ($32,200) and Head of Household Filers ($24,150).
  • Increased Federal Gift and Estate Basic Exclusion amount to $15 million (up from $13.9 million in 2025) and continued spousal portability of this exclusion.
  • A significant increase of an employer childcare credit, from $150,000 to $500,000 for large businesses and $600,000 for eligible small businesses)[1]. This increased employer credit provides incentives for businesses to offer specific childcare resources to employees.
  • The Introduction of TRUMP accounts, a new type of tax deferred child savings account, rolling out in July of this year.
  • Indexed and cost of living adjustments to several other accounts, credits and exclusions.

The Secure Act 2.0 Updates:

  • Secure Act 2.0 follows prior provision implementations with additional increases to savings limits, a new rule regarding paper statements and additional coverage in ABLE accounts. This year also changes how high-income savers can make “catchup” retirement plan contributions. Before diving into this year’s changes, one 2025 Secure Act 2.0 provision is worth a second look.
  • 2025 Secure Act Auto Enrollment & Auto Escalation Feature:
    • Newer (post 2022) employer retirement plans allowing optional employee contributions (like 401k and 403b plans) must now implement automatic enrollment of new employees. Prior to this feature, employees were required to opt into these workplace retirement plans by completing the required enrollment paperwork. Auto-enrollment requires employees to defer at least 3% of their compensation and the auto-escalation feature requires an automatic 1% increase of employee contributions annually until deferrals reach 10%.
    • The auto enrollment feature creates an easier on-ramp for employees, and the auto escalation feature better prepares employees for tomorrow. Requiring employees to “opt out” of a plan rather than “opt into” a plan helps overcome inertia and provides a needed behavioral nudge towards retirement security.

2026 Increased Retirement Savings Limits by Type of Retirement Accounts

In addition to the above increased employee deferral amounts, employer funded plans such as SEPs, Defined Benefit and Defined Contribution Plans are also subject to higher employer/employee combined contribution limits[2].  

New 401(k) and 403(b) Roth Catch-up Rules for 2026

Alongside the ability to contribute more into retirement plans, 2026 brings meaningful changes to how high-earning savers can make catchup and super-catchup contributions. Beginning this year, employees who earned more than $150,000 of FICA taxable earnings through their employer in the prior year (2025) are only allowed to make Roth catchup and super-catchup contributions into their employer retirement plans. Employees who earned less than $150,000 are still able to choose between traditional deferred retirement plan contributions and Roth contributions.

There are both “roses” and “thorns” resulting from this change.  Requiring high-earning savers to contribute their “catch-up” contributions post-tax (i.e., Roth) will reduce their ability to lower their taxable income and may lead to higher current-year tax burdens. On the other hand, there are many benefits to an increasing Roth balance. Assets held within retirement plan Roth accounts may be more tax efficient in retirement and have greater flexibility than their traditional tax-deferred counterparts.

Example

In 2025 Kale (59) participated in a 401(k) plan through his employer. Kale earned $300,000 in 2025 and deferred $31,000 into the plan. Kale maximized his 2025 elective deferral contribution of $23,500 and made an additional $7,500 in catch-up contributions.

In 2026 Kale is now 60 and continues to participate in the plan. Kale plans on taking advantage of the super-catch-up provision this year and will maximize his elective deferral of $24,500 and super-catch-up deferral of $11,250 for a combined total of $35,750.

Because Kale earned more than $150,000 in the prior year, he can only deduct the $24,500 elective deferral contribution as a pre-tax contribution. The additional $11,250 super-catch-up contribution must be made to the Roth account and will be included in his taxable compensation for the year.

Both Kale’s 2026 deferred ($24,500) and Roth ($11,250) balances will grow tax deferred within their respective plans. However, after being open for five years, future distributions from Kale’s Roth account will be tax free and his Roth plan will never be subject to Required Minimum Distributions.

Annual Paper Statements

Beginning in 2026, retirement plans are required to provide a paper benefit statement. Paper statements for defined contribution plans, such as 401(k) and 403(b) plans, are required at least once annually. Paper statements for defined benefit pension plans are required to be mailed once every three years. Providing non-electronic statements is intended to encourage additional employee plan participation and hopefully kickstart conversations around retirement.

Expanded ABLE Account Eligibility

ABLE accounts help eligible individuals with disabilities save for qualified expenses without risking eligibility to certain federal benefits. Beginning in 2026, an ABLE account can be opened for an individual who had a disability begin before age 46. This is a meaningful increase to prior rules around ABLE accounts, which previously limited eligibility to individuals whose disabilities began before 26. An estimated six million additional Americans should now be eligible for ABLE accounts[3].

We are always ready to ensure that you are prepared for the financial road ahead. If you want to talk about your retirement plan, ABLE accounts, the new TRUMP account options, or finding a balance between increasing contributions and other financial goals, please don’t hesitate to reach out. We are honored to be your financial partner and excited to plan with you to face the challenges and opportunities of 2026.

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This article is for informational purposes only and does not constitute investment advice. Past performance is not a guarantee of future results. All investments involve risk, including possible loss of principal. International investments involve additional risks, including currency fluctuations and political instability.