Archive for category: Retirement Planning

From changing Federal Reserve rates to evolving tax brackets, the financial landscape is shifting quickly. As you prepare for the 2026 tax year, now is an ideal time to revisit key retirement planning fundamentals. Notably, the Internal Revenue Service has announced important updates, allowing savers and investors to adjust their strategies and maximize their future security.

These changes impact how much you can set aside, who qualifies for deductions, and how the phase‑outs operate.

Here’s what you need to know. 

What’s Changing? A Snapshot of the 2026 Limits

The IRS recently released its cost‑of‑living adjustment notice for 2026, and the headline figures are:

• The annual contribution limit for IRAs (traditional + Roth combined) is increasing from $7,000 to $7,500.
• The catch‑up contribution (for those age 50 and older) is increasing from $1,000 to $1,100.
• For traditional IRA deduction eligibility (when you or your spouse are covered by a workplace plan), the income phase‐out ranges are increasing:
  • For single filers covered by a workplace plan: $81,000–$91,000 (up from $79,000–$89,000)
  • For married filing jointly (spouse making the contribution covered by a workplace plan): $129,000–$149,000 (up from $126,000–$146,000)
• For Roth IRA contribution eligibility, the phase‐out ranges increase to:
  • Singles/Heads of Household: $153,000–$168,000 (up from $150,000–$165,000)
  • Married filing jointly: $242,000–$252,000 (up from $236,000–$246,000)
• The limit for SIMPLE IRAs also increases (though our focus here is the general IRA).

These adjustments may seem modest, but they reflect meaningful changes, especially when compounded over time, and they can alter your optimal retirement savings strategy.

Why These Changes Matter

1. Increased Contribution Room

By boosting the IRA limit to $7,500 (+$500 over 2025), savers gain additional tax‑advantaged space. While $500 may sound small, over a multi‑decade horizon and combined with investment growth, this extra buffer can meaningfully increase retirement assets.

2. Deductions and Eligibility Shift Upward

Because the income phase‑out thresholds have risen, a greater number of taxpayers can qualify for either the full or partial deductible traditional IRA contribution, or contribute to a Roth IRA when previously limited. That opens up strategic flexibility.

3. Inflation Protection

These annual adjustments reflect inflation and help preserve purchasing power for retirement savings. Without adjustments, over time, the value of tax‑advantaged contributions would erode.

4. Strategic Planning Opportunities

Higher limits and higher thresholds give financial advisors and their clients more flexibility to optimize tax treatment, asset allocation, and timing of contributions (especially for catch‑up contributions for older savers).

Strategic Implications for Different Groups

Here’s how these changes affect various types of savers, and what to consider.

A. Younger Savers (Under 50)

Key takeaway: You can now contribute up to $7,500 for 2026.

• If you’re not covered by a retirement plan at work, you may still deduct your traditional IRA contribution fully.
• If you are covered, check the phase‑out; it begins at $81,000 for singles in 2026.
• Roth IRAs become more accessible due to higher phase‐out thresholds; consider whether Roth vs. traditional makes more sense based on your tax expectations.
• Use the extra room ($500) to “max out” earlier in the year rather than waiting until year‑end.

B. Mid‑Career Savers (~50‑59)

Key takeaway: You now have a catch‑up allowance of $1,100 for IRAs on top of the base $7,500 (so, $8,600 total if you do the full catch‑up).

• If you haven’t yet taken full advantage of retirement‑savings opportunities, now is the time.
• Consider whether you should split contributions between traditional and Roth IRAs depending on your current vs. future tax rate expectations.
• If you have a workplace plan with catch‑up capabilities, coordinate between your IRA and your employer plan to help optimize total savings.

C. Approaching Retirement (60‑63)

Key takeaway: While the $7,500 (plus catch‑up) applies for IRAs, for 401(k)/403(b)/457 plans, there is “super catch‑up” potential.

• This is a time to accelerate savings and help ensure you’re leveraging every tool.
• It may be wise to revisit your expected retirement income, required distributions (RMDs), tax brackets, and how your IRA vs. 401(k)/Roth allocations will play out.

D. High‑Income Earners & Those with Complex Coverage Scenarios

Key takeaway: With thresholds shifting upward, eligibility is broader—but caveats remain.

• If your income exceeds the new phase‑out thresholds for deduction or Roth eligibility, you may need to consider “backdoor” strategies (e.g., nondeductible traditional IRAs rolled into a Roth), but also be aware of the tax and legislative risks of such moves.
• Check whether your spouse is covered by a workplace plan that affects the deduction phase‑out for you.
• For those with multiple retirement accounts and significant assets, this is a great year to revisit how you allocate contributions, manage tax diversification (pre‑tax vs. Roth), and integrate with estate‑planning goals.

Practical Planning Steps for 2026

To help maximize the benefit of these IRA limit changes, here are practical steps you can consider taking: 

1. Mark Your Calendar and Update Savings Plan
   • Adjust your payroll or brokerage auto‑contribution settings for 2026 to reflect the $7,500 limit (or $8,600 if age 50+).
   • Consider splitting contributions (January vs. monthly installments) to help reduce the risk of missing contributions later.
2. Revisit Your Traditional vs. Roth IRA Strategy
   • A traditional IRA offers an immediate deduction (subject to income/coverage rules).
   • Roth IRA offers tax‑free growth and withdrawals (in many cases).
   • With higher phase‑outs, more people may now qualify for a Roth or partial deductibility of a traditional IRA.
   • Ask: “What do I expect my tax rate to be in retirement vs now?” If you anticipate higher taxes later, Roth may be more appropriate; if you’re in a higher tax bracket now and expect to be lower later, traditional might win out.
3. Review Income Phase‑Outs Early
   • If your modified adjusted gross income (MAGI) is near or above the phase‑out ranges, plan accordingly. For example:
     • Single & covered by a workplace plan: $81,000–$91,000.
     • Married filing jointly & contributor covered by a workplace plan: $129,000–$149,000.
   • If you’re outside eligibility for deduction or Roth, consider alternative strategies (e.g., nondeductible IRA + Roth conversion).
   • Keep an eye on contributions and income as the year progresses; you may need to adjust withholdings or timing of income/unrealized gains to stay within thresholds.
4. Coordinate With Employer Plans
   • While this blog focuses on IRAs, don’t forget employer‑sponsored plans (401(k), 403(b)). The base contribution limit for 2026 is $24,500.
   • The interplay between your employer plan and IRA can determine your optimal tax‑advantaged savings strategy. For example, if you’re maxing out your 401(k) and still have capacity, then the IRA becomes another layer.
5. Catch‑Up Contributions for Older Savers
   • If you’re age 50 or older, you now have $1,100 additional room in IRAs.
   • If you’re also using catch‑ups in your employer plan or in a SIMPLE plan, map out how all of your catch‑ups work together.
   • Consider your “tax brackets,” estate‑planning implications (RMDs), and whether Roth conversions make sense now vs. later.
6. Monitor Legislative and Regulatory Risk
   • Rules can change (e.g., treatment of Roth conversions, taxation of high‑income earners, required minimum distributions).
   • It’s wise to revisit your retirement plan annually (or more often) and adjust for regulatory shifts, not just inflation‑indexed changes.
7. Focus on Investment Growth & Tax Efficiency
   • Contribution limits matter, but arguably more important is what happens after the contribution. Regularly review your investment mix, fees, rebalancing, and tax efficiency within and outside of tax‑advantaged accounts.
   • Especially for IRA accounts (traditional or Roth), consider your long‑term withdrawal strategy, tax diversification, and how these accounts integrate with taxable and tax‑free buckets.

Why You Should Act Now (Even Though It’s for 2026)

• Advance Planning Matters: Setting up your contribution strategy now (including payroll elections or brokerage automatic settings) puts you ahead of the game rather than scrambling later.
• Benefit of Early Contributions: The earlier you contribute, the longer your money can potentially grow tax‑advantaged.
• Year‑End Income Management: Because eligibility (deduction or Roth) depends on income, you may want to manage income, bonuses, or capital gains timing in 2026 to stay within favourable ranges.
• Coordination Across Accounts: If you have multiple accounts (401(k), IRA, HSA, taxable brokerage), then building an integrated strategy now helps you avoid surprises.
• Leverage the Extra Room: Given the ceilings are rising, every dollar of tax‑advantaged savings matters; take full advantage.

Common Questions About Roth IRAs

Q: “Can I contribute $7,500 to a Roth IRA and another $7,500 to a traditional IRA in 2026?”
A: No, the $7,500 (plus the $1,100 catch‑up if applicable) is the total contribution limit across all IRAs (traditional + Roth) for the tax year. That means you must allocate it between the two types. Strategically, we’ll help you decide the split that makes sense given your tax bracket, expected future tax, and income eligibility.

Q: “I’m covered by a workplace retirement plan; can I still deduct my traditional IRA contribution?”
A: Possibly, it depends on your filing status and MAGI. For 2026, if you’re single and covered by a workplace plan, the deduction is phased out between $81,000–$91,000. Above $91,000, your deduction is eliminated. We’ll review your projected income to determine whether a deduction applies, whether a Roth makes more sense, or whether a nondeductible IRA + conversion strategy is appropriate.

Q: “I earn too much for a Roth IRA. Now what?”
A: The 2026 phase‑out for Roth contributions (single: $153,000–$168,000; married filing jointly: $242,000–$252,000) gives more leeway. If your income still exceeds those levels, you may consider a backdoor Roth approach: contribute nondeductible to a traditional IRA, then convert to Roth. But there are nuances (tax on existing traditional IRA balances, timing, legislative risk). We’ll walk you through whether that strategy works for you.

Q: “Does the new limit mean I should increase my contribution from $7,000 to $7,500?”
A: If you’re in a position to do so, yes. Increasing your contribution gives you extra tax‑advantaged savings. But contributing the max isn’t always the correct move for everyone. We’ll assess your cash flow, emergency reserves, employer match (if applicable), debt management, and overall financial picture to decide whether prioritizing IRA max contributes to your strategy.

Q: “How do these changes affect my employer‑sponsored plan (like a 401(k))?”
A: While this blog focuses on IRAs, the 2026 401(k) limit is rising to $24,500 (from $23,500), and catch‑up for those 50+ becomes $8,000 (from $7,500). We’ll look at both IRA and employer plan contributions in tandem. Often, the optimal strategy is to first capture any employer match, then maximize tax‑advantaged contributions across all vehicles.

How Agemy Financial Strategies Can Help

At Agemy Financial Strategies, we’re highly experienced in tailored retirement and wealth‑planning solutions. Here’s how we bring value to this update:

• Personalized Contribution Planning: We’ll run projections for your tax bracket now and in retirement, factoring in the new 2026 limits, to determine the optimal mix of traditional vs. Roth contributions.
• Income & Tax Phase‑out Modeling: We’ll analyze your income trajectory to determine whether you fall into phase‑out zones for deduction or Roth eligibility, and help you stay within favourable thresholds when possible.
• Integrated Account Strategy: We look across IRAs, 401(k)s, HSAs, taxable accounts, and brokerage accounts to build a holistic savings and withdrawal strategy. We’ll also consider RMDs, legacy goals, and tax‑efficient withdrawals.
• Year‑End and Mid‑Year Reviews: We’ll monitor for the rest of 2025 and 2026 to verify that your contribution elections, withholding, investment allocations, and income management stay aligned with your goals and the shifting regulatory environment.
• Ongoing Oversight and Adjustment: Retirement planning is not “set it and forget it.” We’ll regularly revisit accounts, investment performance, tax law changes, and market dynamics to help keep your strategy optimized.

Final Thoughts: Seize the Opportunity

The 2026 IRA contribution limit increase is modest but meaningful, especially when combined with higher income thresholds and broader access to Roth opportunities. For many clients of Agemy Financial Strategies, this is a chance to boost savings, refine tax strategies, and align contributions more closely with long‑term goals.

Whether you’re just beginning your savings journey, accelerating toward retirement, or somewhere in between, now is the time to update your plan:

• Evaluate whether you can increase your IRA contribution to $7,500 (or $8,600 if you’re age 50+).
• Reassess your traditional vs. Roth IRA allocation given the new phase‑out ranges.
• Coordinate your contributions across IRAs and employer plans.
• Discuss with your advisor the case for backdoor Roth conversions, catch‑up strategies, and tax‑efficient retirement withdrawal planning.

At Agemy Financial Strategies, we’re committed to helping you navigate these changes, optimize what you can control, and keep your retirement strategy resilient in a changing environment. 

If you’d like to review your 2026 retirement‑savings plan, contribution elections, or tax‑efficient strategies, let’s schedule a time to connect at agemy.com. 

Investment advisory services are offered through Agemy Wealth Advisors, LLC, a Registered Investment Advisor and fiduciary to its clients. Agemy Financial Strategies, Inc. is a franchisee of Retirement Income Source®, LLC. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC are associated entities. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC entities are not associated with Retirement Income Source®, LLC. The information contained in this e-mail is intended for the exclusive use of the addressee(s) and may contain confidential or privileged information. Any review, reliance or distribution by others or forwarding without the express permission of the sender is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. To the extent permitted by law, Agemy Financial Strategies, Inc and Agemy Wealth Advisors, LLC, and Retirement Income Source, LLC do not accept any liability arising from the use or retransmission of the information in this e-mail.