We hope this letter finds you well after a happy holiday season.
As we close the books on 2025, we are sending our annual Milestones Newsletter, highlighting contribution limits and age milestones which may present planning opportunities for 2026.
We realize there is a LOT of information below. Not everything will be relevant to each individual or family. We recommend giving it a read and highlighting items relevant to your personal situation. We have also created an online 2 page PDF with the majority of this information plus additional tax data you can access by clicking here: 2026 Key Financial Data
Common Contribution Limits:
Roth IRA’s – The annual contribution limit for IRA’s (Roth and Traditional) is increasing from $7,000 to $7,500. For those over 50 years old, the catch-up contribution limit is increasing from $1,000 to $1,100. You can make a full contribution if your adjusted gross income (AGI) is under $153,000 for a single tax filer and under $242,000 for married filers. Conversely, if you are a single filer and make more than $168,000 AGI, or married making more than $252,000, you cannot make contributions to a Roth IRA.
Traditional IRA’s – For Traditional IRA’s, the deductible amount from your income is complicated depending on whether you or your spouse are covered under an employer-sponsored plan, as well as your income level. Please reach out to us or your CPA if you have questions on how this pertains to your personal situation.
401(k) Plans – increasing from $23,500/yr to $24,500/yr for 2026 for employee deferrals. Catch-up contributions for those age 50 and older are increasing from $7,500/yr to $8,000/yr (same for Solo 401k, 403b, and governmental 457b plans). For those age 60-63, the catch-up amount increases to $11,250.
The combined employer and employee contribution limits are $72,000 for employees 49 or younger, $80,000 for employees 50-59 or 64 or older, and $83,250 for employees 60-63.
SEP IRA’s – for self-employed individuals, the total amount you can contribute to a SEP IRA is limited to 25% of employee compensation up to $72,000 for 2026 (up from $70,000 in 2025).
SIMPLE IRA’s – The contribution limit on SIMPLE retirement accounts is increasing to $17,000 for 2026, up from the 2025 limit of $16,500. The SIMPLE catch-up limit is $4,000 for those reaching the age of 50 in 2026. For those age 60-63, the catch-up amount is $5,250.
HSA’s – The annual limit on deductible contributions for single individuals making HSA contributions is increasing from $4,300 to $4,400. The annual limit for families is also increasing from $8,550 to $8,750. For contributors aged 55 and above, a $1,000 catch-up is available.
To participate in an HSA an employee must be in a High-Deductible Health Plan (HDHP). Deductibles for qualifying HDHP’s for 2026: $1,700 for singles, and $3,400 for families. Out of pocket maximums for HDHP’s for 2026: $8,500 for singles, $17,000 for families. Check with your employer’s health plan to determine eligibility.
Indiana Tax Credit for 529’s – At this time, the maximum tax credit remains at 20% of annual contributions up to $7,500/yr or a $1,500 tax credit. For Married Filing Separate, the max tax credit is $750.
Legislation has been introduced to increase the tax credit to $2,500, BUT that legislation has not been passed at this time.
The criteria for qualified 529 expenses are also expanding in 2026: K-12 expenses aggregate limit increases to $20k, and expenses to attain or maintain eligible credentials are now included.
Additionally, for tax years 2023 and later you can now make 529 contributions up until the original due date of the return before extensions (i.e., April 15) and designate it as a prior year contribution. This added flexibility can add some additional state tax planning opportunities, so reach out to us or your CPA for additional information.
Trump Accounts – Any child under the age of 18 is eligible to open an account. Contributions to this account are post-tax and limited to $5,000/yr. Funds cannot be withdrawn prior to 18, earnings are tax-deferred, and there is no earned income requirement. Additionally, any child born between 2025 and 2028 can enroll and get a one-time $1,000 contribution from the federal government. At this time accounts cannot be opened or funded until July 4, 2026, so stay tuned for more information.
Gifts – Each year, the IRS sets the annual gift tax exclusion, which allows a taxpayer to give a certain amount (in 2026, $19,000) per recipient tax-free without using any of the taxpayer’s lifetime gifting limit (gifts above the annual limit go against the Estate Tax Exemption of $15 million for single taxpayers and $30 million for married couples.). For married couples, this means that they can give $38,000/year per recipient tax-free without using any of their lifetime gift tax exemption.
If one gifts an amount that is above the annual gift tax exclusion, that individual will use a portion of his or her lifetime gift tax exemption ($15 million in 2026). The gift and estate tax exemption are linked, meaning that the use of one’s gift tax exemption will reduce the amount one may leave at death estate-tax-free. If one makes gifts more than the annual gift tax exclusion, one must file a gift tax return, due April 15 in the following year, to report the gift and track the amount of the lifetime exemption that has been used.
Social Security Max Taxable Wage – The maximum annual wage amount at which employees pay a Social Security tax is increasing from $176,100 to $184,500. The rate remains the same at 6.2%.
Social Security Cost-of-Living-Adjustment (COLA) – For 2026, the cost-of-living-adjustment for Social Security and Supplemental Social Security Income (SSI) is 2.8%. This is slightly more than last year (2.5%).
Standard Deduction – For married filing jointly, the standard deduction from AGI to reach taxable income is increasing from $30,000 to $32,200. Accordingly, it is increasing from $15,000 to $16,100 for single taxpayers, and from $22,500 to $24,150 for Heads of Household.
Those who are over 65 and/or blind receive an additional $1,650 standard deduction for each qualifying spouse. The additional deduction is $2,050 for single filers.
Retirement Plans/Small Business Owners may want to consider the following changes:
Pensions/Defined Benefit Plans – For 2025, the maximum annual benefit payable from a defined benefit plan is increasing from $280,000 to $290,000. Consult with an advisor for clarification of the eligibility rules to receive benefits found on the plan documents (typically begin as early as age 62 and no later than age 65).
Employer Match Compensation Limit – This amount is increasing from $350,000 to $360,000. This means that if an employer match is 4% of salary, and your salary is $400,000/yr, the match would be 4%*$360,000 = $14,400.
Highly Compensated Employees – The threshold that identifies an employee as highly compensated is increasing from $155,000 to $160,000. This means any employee who is paid more than $160,000 in 2025 is considered “highly compensated”. An unexpected increase in highly compensated employees may trigger compliance-testing issues within the company’s retirement plan and should be reviewed by the advisor running the plan.
Age Milestones
Age 50 – You may increase your annual contribution to your 401k by $8,000, while those contributing to a Roth or Traditional IRA can add an additional $1,100 annually. With retirement rapidly approaching, this offers a great opportunity to supercharge your savings. If you participate in a SIMPLE IRA, you can increase your contribution by $4,000.
Age 55 –If you are between ages 55 and 59 ½ and leave your job, the IRS rule of 55 may allow you to receive a distribution from your 401(k), 403(a), or 403(b) plan after reaching age 55 without triggering the 10% early withdrawal penalty if your plan provides for such distributions. Keep in mind you will still pay ordinary income tax on the withdrawals, but this could help you bridge the gap until you are eligible to draw from IRA’s or Social Security.
Also at age 55, you may contribute and deduct an extra $1,000 to your HSA.
Age 59 ½ – At this point, you may withdraw money from your IRA’s, or employer-sponsored plans without paying the 10% penalty for being under age 59 ½. While there is no penalty, the withdrawals will still be taxed as ordinary income (unless from a Roth 401(k) / Roth IRA or the basis from a non-deductible IRA). Keep in mind that no matter your age, a Roth must be open for at least 5 years to take tax and penalty free distributions on gains.
Age 60 – You may be eligible for Social Security Survivorship Benefits if you are a widow or widower. If you are eligible, be aware that taking SS at the soonest eligible date will reduce your benefit by as much as 28.5%.
Age 62 – You are eligible for reduced Social Security, however, like survivorship benefits mentioned above, the amount will be permanently reduced by up to 25%. You will want assistance analyzing whether taking Social Security early at a reduced benefit makes sense within the context of your overall financial plan, health, etc.
If you are still working and deciding if you should take Social Security before your full retirement age (FRA), it is worth knowing that your benefit may be reduced. We recommend consulting with your advisor and/or CPA to assist with that decision.
Age 60-63 – 401(k) catch-up contributions increase from $7,500 to $11,250, and SIMPLE IRA catch-up contributions increase from $4,000 to $5,250.
Age 65 – Medicare is now part of your overall health care decision. You are given a 7-month window to enroll (3 months prior to your 65th birthday, the month of your birthday, and 3 months following that month).
If you do not feel you have the expertise to make an informed decision, we can put you in contact with a trusted expert and/or resource who can assist you.
Aside from Medicare being an important milestone, any Disability Income policies should be reviewed if you are still working (or if you are collecting benefits). Many benefits will stop paying at age 65 and coverage generally ends at that time.
Age 67 – This is considered full retirement age (for individuals born after 1959) and you are entitled to your full Social Security Benefit at this point.
If you are still working, or do not need the income, it is worth analyzing whether you should begin taking benefits since taxation and increased benefits for waiting could be a factor in your decision.
For those who have not done so, we recommend reviewing your Social Security statement on an annual basis to determine if you were properly credited for social security wages and taxes paid. You can now create an online login at https://www.ssa.gov . Statements are now only mailed every 5yrs if you do not have an online login.
Age 70 – Even if you are still working, this is the age that will give you the maximum Social Security payout. Benefits no longer accumulate at 8% per year after this point.
Age 70 ½ – Qualified Charitable Distributions (QCDs) are permitted from IRAs only. This includes inherited IRAs, but QCDs are not allowed from 401(k)s. QCDs are tax free contributions to qualified charitable organizations made directly from your IRA. QCDs also count towards your annual RMD, so this can help reduce the tax consequences of RMDs. The amount that an individual can donate to charity directly from an IRA and NOT be taxed on that distribution, is increasing from $108,000 to $111,000. We recommend consulting with your advisor and CPA to see if QCDs make sense for your situation.
Age 73 – Under Secure Act 2.0, a person that turns 73 in 2025 must begin taking Required Minimum Distributions (RMDs) from your retirement accounts such as IRA’s and 401K’s (no need to take from your Roth IRA). There is some flexibility with regards to your first distribution, but we recommend you talk with us and your tax advisor to make an informed decision. If you are charitably inclined, there are planning techniques that can be incorporated with this distribution as well.
If you were already taking your RMDs based on age 70.5 or 72 according to the old rules, this change does not apply to you. You will remain on your existing RMD schedule.
If you are still working for the company sponsoring the plan when you turn 73 and do not own more than 5% of the company, you may be eligible to delay RMDs on assets held in the company retirement plan as long as you are employed. However, once you leave that company, or roll the assets to an IRA, you must start taking RMDs.
Note on Beneficiary / Inherited IRA’s: Passed in late 2019, The Secure Act altered both the RMD age requirements (mentioned above) as well as newly inherited Beneficiary IRAs. This new law does not impact the ability of spouses to inherit an IRA and “stretch” that IRA over their lifetime. However, other than a spousal IRA, an IRA inherited from a grandparent, parent, etc. will now have different rules. Rather than allowing the individual to stretch that IRA over their lifetime, the government mandates it be taken in full within 10yrs. For those inheriting an IRA in which the previous owner had already begun taking RMDs, the new account owner may be required to continue that RMD in years 1-9 and completely liquidate the account by year 10. If the previous owner had not begun taking RMDs, the new account owner must liquidate the account by the 10th year, but they may not be required to take distributions in years 1-9.
For a Roth IRA inherited after 2019, the same 10-year rule applies (account must be liquidated by the end of 10th year after inheriting) but there are no annual RMD requirements, regardless of the original IRA owner’s age. Roth IRAs inherited before 2019 are treated the opposite – no 10-year rule but will have an annual RMD.
As always, should you or your loved ones have any questions, please do not hesitate to contact LJI.
Best wishes for a Happy Holiday season and a safe and prosperous new year!
Your LJI Team