Women's Money Wisdom

Episode 308: Nailing Your 2026 Retirement Benefits: The New Rules, Higher Limits, and the "Power Couple" Strategy

• Melissa Joy, CFP® • Season 1 • Episode 308

Share episode

Employer retirement plans can be one of the most powerful wealth-building tools available, yet they are also among the most confusing. In this episode of the Women's Money Wisdom podcast, Melissa Joy, CFP®, breaks down how to make the most of your workplace retirement benefits in 2026.

Melissa walks through the key retirement plans many employees have access to, including 401(k), 403(b), and 457 plans, and explains why 2026 is a pivotal year for retirement planning. With multiple legislative changes now in effect, including SECURE Act 1 and 2 and new tax rules impacting catch-up contributions, understanding your options has never been more important, especially for high earners.

This episode covers updated contribution limits, new catch-up contribution rules for those over age 50, and the temporary super catch-up opportunity for individuals ages 60 to 63. Melissa also explains the new Roth mandate for high earners, what it means for your tax strategy, and how it may change the way you approach retirement savings going forward.

Beyond contribution limits, Melissa explores advanced planning opportunities such as after-tax contributions, mega backdoor Roth strategies, and how different employer plan designs can dramatically affect how much you are able to save. She also highlights commonly overlooked strategies for dual-income households, spousal IRAs, and the growing role of Health Savings Accounts as an extension of retirement planning.

If retirement planning feels overwhelming, this episode offers clarity, structure, and actionable guidance to help you confidently use your employer benefits to support your long-term goals.

Key topics discussed include:

  • 2026 retirement contribution limits and what’s changed
  • Catch-up and super catch-up contribution rules
  • The new Roth requirement for high earners over age 50
  • Coordinating retirement savings for couples
  • Using HSAs as a long-term retirement strategy
  • Mega backdoor Roth opportunities and plan design considerations
  • Common mistakes that can reduce employer matching

For personalized guidance, Melissa encourages listeners to review their options with a financial planner to ensure their retirement strategy aligns with both current tax laws and long-term goals.

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

SPEAKER_00:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence, and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show. And so I thought I would devote an episode today to talk about how to do your best when it comes to your employer retirement plans. So I'm talking about your 401, your 403B. Some of you may have what's called a 457 plan or deferred compensation plan. And these are going to be the topics that we're talking about today. Some of the information is kind of, you know, just keeping you posted on how things work, but other parts are changes and relevant to the new tax year. And we're focused on everyone, but especially those of you who are high earners that have more complexity, more opportunities to save and invest in your retirement plans, but also more to figure out. So without further ado, why don't we get started? So, first of all, I'll just mention that 2026 is a really important year when it comes to changes in terms of your retirement benefits. There have been several new pieces of legislation, um, the Tax Cuts and Jobs Act, the One Big Beautiful Bill Act, which was the 2025 tax legislation, plus several um laws that change kind of rules when it comes to retirement plans in particular, the Secure Act one and two come to mind. And so laws are like coming in and out all the time. Um, and a lot of them are coming into play um this year. It's kind of a reset year because there's um a few years window where there's some extra catch-up contributions available for those ages 60, 61, 62, and 63. There are new rules for high earners who are over the age of 50 for their catch up contributions. And um, you know, everything is is kind of just being thrown out there for you to ingest, hopefully, if you are aware of these changes. So um it's one of those years where you really need to lock in and understand how to maximize retirement savings and consider some changes that are coming in. So, first of all, to get started, I want you to be familiar with some of the contribution limits that are now here for 2026. Um, first of all, your regular contribution to something like a 401k or 403B, 457, if you are ages under age 50, so 49 and younger, is 24,500 is your maximum um deferral amount. And that is up from 23,500 and 2020. So you can save$1,000 a year more and get the opportunity to either put money into traditional, which means that you're reducing your reportable income for your tax return, or Roth in many cases, if not most retirement plans nowadays, also offer Roth options. And that number is just up$1,000 from previous years. For traditional and Roth IRAs, not the main focus of this conversation, but certainly relevant for many of you. That amount that you're allowed to contribute is going from$7,000 to$7,500 for 2026. So a$500 increase. Now there's also a super catch up contribution. That is for people ages 60, 61, 62, and 63. This was also available last year, but you may not have been aware of it because it's a very kind of niche eight set of ages. It's a temporary super ketchup contribution, and that changes your catch up contribution so that it can go up to$11,250. So your total limit in 2026 would be$35,750 if you were in these particular age ranges. Meanwhile, the standard catch up contribution is for those of us who are ages 50 or older. Um, that is me and I'm sure some of our listeners as well. That has increased to$8,000 for 2026. And so your maximum that you can contribute is$32,500. Now there's one more thing to keep in mind because these are the contributions that are allowed in most retirement plans. But sometimes there's even a higher contribution limit if you are in plans that allow for what's called after-tax contributions. It's plan by plan, and it just depends on the way your employer plan is set up as to whether you are eligible for this. But the high, high limit in 2026 for what you can put into a plan, if you happen to be in one of those plans that has even more ability to pack money away, is actually$72,000. So these are huge numbers, huge amounts to be able to defer. But then there is also for that$72,000, it goes higher. If you're over age 50, it goes up to$80,000. And if you're in that super catch-up range, it will go all the way up to$83,250. Man, that is a lot to keep track of. And we haven't even gotten to the new rule for high earners yet. But I'll just mention if your head is kind of spending, um, you're probably not alone. And so it is really important to understand what your particular retirement plan has to offer. That is one of the first things that we research when we work with clients each year is what is available to you depending on your company retirement plan. And it could be completely different. One spouse may only be able to contribute the standard amount of 23,05, or I sorry, I'm using previous years numbers, but um the standard amount of 24,500. And another family member, I'll use the example of employees of the University of Michigan, can actually contribute both to 403B and 457 of that amount or even higher. And so they may be getting close to that$72,000 contribution limit. Now, 2026 also has a brand new rule that came into effect with the One Big Beautiful Bill Act. And that rule is looking right at higher earners. And this in this case, this is one of the few cases where it's not what you report on your taxes combined as a couple, it follows each earner. And it is um a high earner Roth mandate that says that if you are eligible for a catch up contribution because you are over age 50, and that would include that super catch-up for those 60 to 63, then if you earned more than$150,000 in the previous year, you would need to or be forced to do Roth contributions for your catch-up contribution. Now, what this means is you can't get a tax break on that last$8,000 that you're able to contribute. This rule only starts this year, and you kind of have to think that it wasn't enforced last year because we were halfway through the year when the law was passed. Um, and so you wouldn't be getting as much, let's say you were mid-50s and you'd been doing a catch-up contribution. You won't be getting as much tax deferral as you've gotten in a year like last year if you'd been maxing out, because you're going to be forced to pay the tax and put in money after tax into Roth as long as your 401k or 403B allows for Roth. Now, most plans I see nowadays do allow for Roth, but that is certainly something to double check. And then it's also important to check to see if your catch up contributions are matching what your income was for the previous year. I would say in most cases or many cases, it still may make sense to do the catch up contribution. You'll just end up maximizing or growing your Roth bucket that you may not have been as focused on in previous years. Now, the Roth funds are funds that you won't pay taxes on when you take the money out eventually in retirement. It's also a great asset to leave to heirs because they don't have a tax bill like they typically do for traditional retirement accounts. Um, but this is going to be a tricky rule to enforce. So it matters what your income was in the previous year. You're going to want to look at your W-2 and see what your reportable income was last year. If you're self-employed, if you were reporting as an S-corp, then it your wages for the S-corp matter versus if you are a sole proprietor or um reporting as an LLC, you actually aren't subject to this rule at this time. And there may be one spouse who is more highly compensated, but both spouses and a family work, in which case you may be less focused on the lower compensated spouse's retirement deferral just because their paychecks are smaller to begin with. But that would be a great way for you to consider getting your catch-up contributions in is to go through a spouse who has income under that$150,000 threshold. So a lot to consider, a big change that comes right at the end of the year. We were getting a lot of clients in November and December who were reaching out and asking, hey, what do I do about this notification from my employer? Because they're, you know, with standard disclosures that were required and being sent by employers, giving people a heads up about their income and contributions. So do make some intentional elections. And one of them would be to strongly consider doing those Roth ketchup contributions. And it's a great way to kind of maximize that bucket, your tax-free bucket, as you prepare for retirement. If your employer does not offer a Roth option yet, you may want to be lobbying the employer to include that in their plan documents in the very near future because you're kind of being cut away from some really important or critical savings strategies because it does require the Roth to be an option for your retirement plan. Now, let's talk about some strategies that I think are really important for families who have two incomes to consider. So often I see one family member, as I've already mentioned, is highly compensated, and they may not be considering or having a kind of dual motivation to look at the less compensated family members or lower income family members' retirement plans. But in many cases where your family's income is very high, those secondary plans can be really important to consider and look at so that you can maximize deferral. It only becomes more important because of that Roth rule for those with who are catch-up age. But I think it's really important for more families than you would think. And so it's, I always tell families, don't just look as an individual, but look as a couple to see how much you're maximizing and really prioritize who's getting the better match, who may be getting the better tax deferral, and look in coordination amongst each other's plans. There's so many cases where I see money left on the table for families that have cash piling up just because the second lower income family member is kind of forgotten in the planning and coordination because they may have a more part-time job or just one that doesn't have as many benefits but has room to defer more when it comes to your retirement savings. And that makes a difference on your joint tax return. Now, of course, it does matter if you consider your money to be kind of mine and yours or ours. Some families just really manage their money extremely separately, and that would make it very difficult to keep track of, you know, kind of who's on first in terms of savings and things like that. And I understand that. But if you're if you're really looking at your marital assets and the money that you're earning in this year coordinated, then I think it it becomes imperative that you consider some of the planning opportunities that may be there for a married couple filing jointly. Also keep in mind that if you have a spouse who isn't working, you may be eligible for a spousal IRA for the non-working spouse, which is also something important to consider. And then I always think nowadays of HSAs or health savings accounts as being an extension of your retirement savings plans. These accounts are investable, they have increasing limits as well. The 2026 family HSA limit is$8,750. And so when you look at families, this income is often underappreciated as an additional retirement savings opportunity. For example, that amount is very similar to the overage 50 catch up limits. And that is the HSA doesn't have the income limits when it comes to the ability to defer taxes. So you may still want to do your overage 50 Roth ketchup and also do a health savings account contribution for a family. And remember too, at age 55 that health savings accounts have an additional$1,000 contribution per family member. So there's an even catch-up opportunities there. What we often see for many retirement plans, and especially for HSAs, is they're just used in cash. But I've also seen clients who have forgotten rollover plans or just never got around to electing a change in terms of how they're invested. So do make sure that you're logging into the accounts and seeing how your account is actually invested and not just looking at the amount you're deferring, but also how it's invested. And consider investing your HSA accounts if you're not spending the money in the same year that you're putting the money away, which I think is a great strategy. So another underappreciated opportunity is for very high earners who also tend to save more than they spend is that there is something called a mega backdoor Roth strategy. That is for plans, and it's not every plan, it's case by case. But if you work for an employer that has a plan that has after-tax savings opportunities, you may be eligible to put money in without a tax break over your deferral rate. This isn't a Roth contribution. And then if you convert those funds to Roth, you would be able to have those funds growing tax-free. The way the rule works, if you do not convert them, is the money that you put in can be taken out tax-free, but any of its growth gets taxed when it gets taken out. So converting those funds over to Roth means that it both is tax-free in terms of your contributions, but also tax-free in terms of growth. And so again, this is a complicated strategy and case by case. Some employers make it easier to manage the mega backdoor strategy by having automatic conversions. And other employers require you to do periodic withdrawals and conversions yourself. So it just depends. And again, this is something where a financial planner like ourselves can help you look into whether this strategy may make sense. There's a whole host of considerations, one of them being, do you have actual extra money to save? Because we're definitely getting into higher threshold amounts in excess of$25,000 to$30,000 in many cases. So that's definitely something to consider. One of the other things that I think it's important to remind you if you are listening, is that if you are self-employed, maybe you just work for yourself and you don't have no employees, or you might have a company with many employees. It's also important to review your retirement plan. So I've already mentioned the importance of having a Roth option in your plans for catch-up contributions in 2026. Some other considerations are many people choose either SEP IRAs or simple IRAs, but they may have additional savings opportunities and perhaps even opportunities to get tax credits if they were to offer 401k plans. They open up broader amounts in many cases for your options for contributing. So do think about reviewing the type of retirement plan that you are offering for yourself and your employees if you're self-employed at this time as well. In closing, I just wanted to provide you a 2026 checklist for things to do after you've listened to this episode. One of the things that I definitely think it's important to do is to review your pay stub and know how much you intend to contribute. If you're planning to max, you can divide the number of paychecks you receive in the year by the maximum contribution limit based on your age. Or if you're deferring, let's say a percentage, like five or 10% of your salary, then you may want to nudge that amount up and make a plan for that during the year. I always think the new year, as well as whenever you are your wages are getting a cost of living or a salary bump, are great times to review this. Also check your W-2 to see if your income was above or below the$150,000 Roth catch-up contribution requirement limit if you're over age 50. Or if you're approaching age 50, you may want to plan for that change by checking to see where your reportable income is at. Do log into your portal and make sure that your planned contributions match what you think is happening. And also review your investments. And finally, it's Always important to also look at your beneficiary designations. And there is one more thing that is important for you to consider. In some employer plans, if you put in all of your contributions at the beginning of the year or halfway through the year, then you don't get all of your match. So double check to see if your plan is one where you need to kind of ease in your contributions over the entire year, or if it's one where you get your match regardless of when you do your contributions. That's another important consideration. And if you're thinking this sounds complicated, you're not alone, there's so many both opportunities but also obstacles when it comes to understanding and knowing the opportunities you have with your retirement plans. If you're feeling stuck or think you need a review, check in with your financial planner. Feel free to call us if you don't have one and make sure that you are using this truly important pool of savings and investing resources to fit in with whatever retirement plan you've got going. Have a great day and don't hesitate to reach out if you have any follow-up questions as a part of the episode. Thank you.

SPEAKER_01:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to ProPlan.com and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as a receipt of or a substitute for personal investment advice from Pro Planning or any other investment professional of your choosing. Copies of Pro Planning's current rent and disclosure brochure and form CRS discussing our advisory services and fees are available upon request or on our website platform at PerlPlan.com. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are Melissa's own and those of her guests. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplan.com.

Head Shot

Melissa Joy, CFP

Host