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2026 financial update

2026 Financial Planning Updates: Retirement, Taxes, Health Accounts, and Social Security

As we approach 2026, several key IRS and federal updates will affect how you plan and manage your finances in the coming year—from retirement contributions and tax brackets to health account limits and Social Security adjustments. Below is a summary of the new figures and what they could mean for your financial strategy.

Disclaimer: Contribution limits and tax rules apply only if you meet IRS eligibility requirements and if your employer plan adopts these provisions. Catch-up contributions may be subject to Roth-only rules for certain high earners starting in 2027. Always confirm with your plan administrator and review IRS and SSA guidance before making elections or claiming benefits.

2026 IRA and 401(k) Limits

The IRS has released important updates to retirement contribution limits that may impact your savings strategy for 2026 (see IRS News Release IR‑2025‑111, “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500,” dated November 13, 2025).

Here’s a summary of the 2026 contribution limits for tax-advantaged retirement accounts (IRS News Release IR‑2025‑111):

  • The annual contribution limit for most 401(k), 403(b), 457, and Thrift Savings Plans will rise to $24,500 (up from $23,500 for 2025).
  • Workers aged 50 and older can contribute an additional $8,000 catch‑up contribution, for a total of $32,500.
  • The “super catch-up” for ages 60–63 remains at $11,250 under SECURE 2.0 rules.
  • IRA contribution limits are increasing to $7,500, with catch-up contributions (for those 50 and older) now at $1,100.

Why This Matters (Benefits and Risks)

These increases allow greater flexibility to save more in tax-advantaged accounts—especially beneficial if you’re in your peak earning years or catching up on retirement contributions. Since these contributions can reduce taxable income or grow tax-free, taking full advantage could support long-term tax efficiency and stronger compounding potential over time.

However, not everyone will qualify to use the full limits; income-based phaseouts, plan rules, and coordination with other accounts (such as SIMPLE or SEP plans) may restrict how much you can contribute, and investing more in tax-advantaged accounts may reduce short‑term cash flow or liquidity.

What to Consider

  • Review your current savings rate and adjust for 2026, keeping in mind your cash‑flow needs and investment risk tolerance.
  • Check IRA eligibility based on income and plan contributions accordingly—deductibility and Roth eligibility may be limited at higher income levels.
  • If you’re 50 or older, decide whether to use catch-up contributions, bearing in mind that some plans may restrict or not automatically adopt certain SECURE 2.0 features.
  • Be aware that Roth catch-up rules are scheduled to take full effect in 2027 for certain higher‑income earners, which may require catch‑ups to be made on a Roth basis (after tax).
  • Self-employed individuals should reassess SEP IRA or solo 401(k) options for optimal contributions, including the impact on estimated taxes and business cash flow.

2026 Federal Tax Brackets

Alongside retirement updates, the IRS has confirmed the new income tax brackets for the 2026 tax year, which incorporate changes from the “One Big Beautiful Bill” (see IRS News Release/Revenue Procedure cited in this IRS inflation adjustment summary). Planning ahead for these adjustments can help you manage withholding, deductions, and overall tax strategy, but exact tax outcomes will depend on your individual situation, filing status, deductions, and other factors.

Here’s a summary of the 2026 federal tax brackets for individual and joint filers (IRS inflation adjustment guidance for 2026):

  • 10% for income up to $12,400 ($24,800 for married couples filing jointly).
  • 12% for income over $12,400 ($24,800 for joint filers).
  • 22% for income over $50,400 ($100,800 for joint filers).
  • 24% for income over $105,700 ($211,400 for joint filers).
  • 32% for income over $201,775 ($403,550 for joint filers).
  • 35% for income over $256,225 ($512,450 for joint filers).
  • 37% for income over $640,600 ($768,700 for joint filers).

Additional 2026 updates include (per the same IRS inflation-adjustment release):

  • Standard deduction: $16,100 (single) / $32,200 (married filing jointly).
  • Maximum earned income tax credit: $8,231 (for taxpayers with three or more qualifying children).
  • Health FSA salary reduction contribution limit: $3,400, up $100 from the 2025 limit of $3,300 (see IRS guidance summarized in 2026 FSA limit notices).
  • Maximum health FSA carryover for plan years beginning in 2026: $680, up from $660 for plan years beginning in 2025.
  • Federal estate tax exemption: $15 million per person, up from nearly $14 million in 2025, according to IRS inflation-adjusted estate and gift tax figures.

These tax rate changes will apply to income earned in 2026 and reflected in returns filed in early 2027. If you expect significant income changes or plan major financial moves like asset sales or retirement, these adjustments may be particularly relevant, but the impact can be positive or negative depending on your income level, deductions, and timing of transactions.

2026 HSA and FSA Contribution Limits

When planning for health-related expenses, the IRS has also announced new limits for 2026 health savings accounts (HSAs) and flexible spending accounts (FSAs). Keeping these updated figures in mind can help you optimize tax savings and manage medical costs more effectively, though HSAs and FSAs are only available if your employer and health plan meet specific IRS requirements.

For 2026, HSA contribution limits (per IRS HSA inflation-adjustment guidance) will be:

  • Self-only coverage: $4,400 (up from $4,300 for 2025).
  • Family coverage: $8,750 (up from $8,550 for 2025).
  • Catch-up (age 55+): $1,000 (unchanged).

To qualify for an HSA, you must be enrolled in a high-deductible health plan with 2026 minimums and maximums as set by the IRS:

  • Minimum deductible: $1,700 (self-only) or $3,400 (family).
  • Maximum out-of-pocket: $8,500 (self-only) or $17,000 (family).

FSA limits for 2026 (per IRS health FSA guidance and related summaries):

  • Health FSA contribution (salary reduction) limit: $3,400 (up from $3,300 for 2025).
  • Health FSA carryover limit from a 2025 plan year into a 2026 plan year: $660.
  • Maximum health FSA carryover from a 2026 plan year into a 2027 plan year: $680.

If your employer offers an FSA, be sure to re‑elect contributions during open enrollment each year—unused funds may be forfeited unless your plan includes carryover flexibility, and employer plan design may set lower limits or different rules than the IRS maximums.

Social Security COLA for 2026

Lastly, Social Security recipients will see a modest increase in benefits for 2026. On October 24, 2025, the Social Security Administration announced a 2.8% cost-of-living adjustment (COLA) to take effect in January 2026 (see SSA press release “Social Security Announces 2.8 Percent Benefit Increase for 2026,” dated October 24, 2025). This adjustment is intended to help benefits keep pace with inflation, though it may not fully offset increases in all living expenses.

Key Details (Per SSA COLA Announcement)

  • The average monthly retirement benefit will increase by about $56.
  • The adjustment is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), based on inflation data from July through September.

While this increase helps offset rising prices, costs such as healthcare and housing may still feel the pinch more acutely, so some retirees may experience only a modest improvement in real purchasing power.

Important Note on Medicare Premiums

The standard Medicare Part B premium is projected to rise from $185 in 2025 to $206.50 in 2026, based on current CMS projections and public guidance. This means your take-home Social Security benefit increase may be smaller than the full COLA amount, and higher-income beneficiaries may face additional income-related monthly adjustment amounts (IRMAA).

Next Steps for Beneficiaries

  • Watch for your COLA notice in December. If you have a my Social Security account, you can view your updated benefit earlier at ssa.gov/myaccount.
  • Review your monthly budget and cash flow, especially if Medicare premiums or other expenses will adjust.
  • Consider how this change fits into your broader income or retirement strategy, and consult your tax or financial professional for personalized advice.

If you have questions about how these changes may affect your finances or long-term goals, reach out to your financial advisor. They can help you assess your situation in the context of current market conditions and Fed policy.

References

Internal Revenue Service. (2025). IRS News Release IR‑2025‑111: 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500. Retrieved from https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500

Internal Revenue Service. (2025). IRS releases tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill. Retrieved from https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill

Newfront Insurance. (2025, December 18). 2026 Health FSA Limit Increases to $3,400. Retrieved from https://www.newfront.com/blog/2026-health-fsa-limit-increases-to-3400

Mercer. (2025, October 8). 2026 health FSA, other health and fringe benefit limits now set. Retrieved from https://www.mercer.com/insights/law-and-policy/2026-health-fsa-other-health-and-fringe-benefit-limits-now-set/

U.S. Internal Revenue Service. (2025). 2026 IRS Contribution Limit Changes. Retrieved from https://www.uandtfinancial.com/files/116698/U&T 2026 IRS Contribution Limits.pdf

Internal Revenue Service. (2025). Notice 26–05: 2026 HSA Contribution Limits and High-Deductible Health Plan Requirements. Internal Revenue Service Publication.

Keenan. (2025, May 4). IRS Announces 2026 HSA and HDHP Limits. Retrieved from https://www.keenan.com/knowledge-center/news-and-insights/blogs/irs-announces-2026-hsa-and-hdhp-limits/

IRS Revenue Procedure 2025-19. 2026 HSA and High-Deductible Health Plan Contribution Limits. Internal Revenue Service.

Social Security Administration. (2025, October 24). Social Security Announces 2.8 Percent Benefit Increase for 2026 [Blog post]. Retrieved from https://www.ssa.gov/blog/en/posts/2025-10-24.html

Social Security Administration. (2025, October 24). Social Security Announces 2.8 Percent Benefit Increase for 2026 [Press release]. Retrieved from https://www.ssa.gov/news/en/press/releases/2025-10-24.html

Social Security Administration. (2025, October 24). Cost-of-Living Adjustment (COLA) Information. Retrieved from https://www.ssa.gov/cola/

Social Security Administration. (2025, October 29). SSA Announces 2.8% Cost-of-Living Adjustment for Social Security Benefits for 2026. Retrieved from https://grsconsulting.com/2025/10/29/ssa-announces-2-8-cost-of-living-adjustment-for-social-security-benefits-for-2026/

Emerald Advisors, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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