3 Big 401(k) Updates That Could Impact Your Future

February 27, 2026

31 min episode · 2 min read

Episode

31 min

Read time

2 min

AI-Generated Summary

Published Feb 28, 2026

Key Takeaways

✓2026 Contribution Limits: The standard 401(k) deferral rises to $24,500 in 2026, up from $23,500. Workers aged 50–59 and 64+ get an $8,000 catch-up. Workers aged 60–63 qualify for a "super catch-up" of $11,250 on top of the base limit — the single largest annual contribution window available in employer-sponsored plans.
✓High-Earner Catch-Up Rule Change: Workers earning above $145,000 in FICA wages who are 50 or older must now direct all catch-up contributions into Roth accounts — no pretax deduction allowed. A $200,000 earner who previously reduced taxable income to $169,000 will now see taxable income rise to roughly $175,500 under 2026 rules.
✓Compounding Math by Starting Age: A 20-year-old saving $95 per month reaches $1 million by 65, with only $51,000 contributed personally. At 30, 89% of the million comes from growth. At 40, still 77%. Adding a dollar-for-dollar employer match cuts required personal contributions roughly in half, pushing growth-plus-match to 97% of the final balance for a 20-year-old.
✓401(k) Rollover Decision on Job Change: 41% of Americans cash out at least part of their 401(k) when leaving a job, and 85% of those take the full balance — triggering ordinary income tax plus a 10% early withdrawal penalty. Three penalty-free alternatives exist: roll into a new employer's 401(k), roll into an IRA at Fidelity, Vanguard, or Schwab, or leave the balance in the former plan if it exceeds $1,000–$5,000.
✓Alternative Investments Entering 401(k) Plans: A 2025 executive order directed the Department of Labor to stop excluding alternative investments — non-publicly traded assets like private equity or real estate syndicates — from 401(k) menus. These options may begin appearing in plan lineups. Participants should audit current allocations and confirm holdings align with low-cost index fund strategies before any alternatives appear.

What It Covers

Brian Preston and Bo Hanson break down three 2026 401(k) rule changes — a raised contribution limit to $24,500, a new Roth-only requirement for high-earner catch-up contributions, and expanded alternative investment options — while reviewing core 401(k) mechanics including compounding math, withdrawal rules, and rollover decisions.

Key Questions Answered

•2026 Contribution Limits: The standard 401(k) deferral rises to $24,500 in 2026, up from $23,500. Workers aged 50–59 and 64+ get an $8,000 catch-up. Workers aged 60–63 qualify for a "super catch-up" of $11,250 on top of the base limit — the single largest annual contribution window available in employer-sponsored plans.
•High-Earner Catch-Up Rule Change: Workers earning above $145,000 in FICA wages who are 50 or older must now direct all catch-up contributions into Roth accounts — no pretax deduction allowed. A $200,000 earner who previously reduced taxable income to $169,000 will now see taxable income rise to roughly $175,500 under 2026 rules.
•Compounding Math by Starting Age: A 20-year-old saving $95 per month reaches $1 million by 65, with only $51,000 contributed personally. At 30, 89% of the million comes from growth. At 40, still 77%. Adding a dollar-for-dollar employer match cuts required personal contributions roughly in half, pushing growth-plus-match to 97% of the final balance for a 20-year-old.
•401(k) Rollover Decision on Job Change: 41% of Americans cash out at least part of their 401(k) when leaving a job, and 85% of those take the full balance — triggering ordinary income tax plus a 10% early withdrawal penalty. Three penalty-free alternatives exist: roll into a new employer's 401(k), roll into an IRA at Fidelity, Vanguard, or Schwab, or leave the balance in the former plan if it exceeds $1,000–$5,000.
•Alternative Investments Entering 401(k) Plans: A 2025 executive order directed the Department of Labor to stop excluding alternative investments — non-publicly traded assets like private equity or real estate syndicates — from 401(k) menus. These options may begin appearing in plan lineups. Participants should audit current allocations and confirm holdings align with low-cost index fund strategies before any alternatives appear.

Notable Moment

The hosts illustrate how large pretax 401(k) balances create compounding tax problems in retirement — forced required minimum distributions starting at age 73 can push retirees into higher brackets, increase Social Security taxability, and raise Medicare premiums, making Roth conversion planning in one's 50s a critical mitigation strategy.

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