BIG 401(k) Changes Coming in 2026 — What You Need To Know

Key Concepts

• Salary Deferral Limit: The maximum amount an employee can contribute to their 401(k) from their salary.
• Combined Annual Contribution Limit (Section 415): The total amount that can be contributed to a 401(k) including employee and employer contributions.
• Catch-Up Contributions: Additional contributions allowed for those age 50 and over.
• Roth Contributions: Contributions made after taxes, with qualified withdrawals being tax-free in retirement.
• Alternative Assets: Investments outside of traditional stocks and bonds, such as private equity, crypto, and real estate.
• Target Date Funds: Retirement funds that automatically adjust their asset allocation over time, becoming more conservative as the target retirement date approaches.
• Financial Order of Operations: A nine-step guide to building wealth efficiently, prioritizing foundational investments before exploring more speculative options.
• Tro Price Study: A 2025 study analyzing the expected implementation of alternative assets in 401(k) plans.

401(k) and Fiscal Policy Updates for 2026

This discussion centers on significant changes to 401(k) plans and broader financial legislation impacting retirement savings for 2026, stemming from updates released by the IRS and an executive order regarding investment options.

Updated Contribution Limits (2026)

The IRS has increased contribution limits for 401(k) plans for 2026. The employee salary deferral limit is now $24,500. The combined annual contribution limit, as defined under Section 415 of the Internal Revenue Code, has been raised to $72,000. This means a total of $47,500 can be contributed through employer and after-tax contributions in addition to the employee’s deferral.

A key nuance involves catch-up contributions. Individuals over 50 can contribute an additional $8,000 annually. Furthermore, those aged 60-63 can contribute an extra $3,250 on top of the $8,000 catch-up amount, totaling $11,250 in catch-up contributions. Critically, the IRS has mandated that catch-up contributions for individuals with FICO wages exceeding $150,000 must now be made as Roth contributions.

Example: An investor aged 55 earning $200,000 annually could contribute $23,500 traditionally in 2025, reducing their taxable income to $169,000. In 2026, while the $24,500 traditional contribution remains possible, the $8,000 catch-up must be Roth, resulting in a taxable income of approximately $175,500. This shift could also impact the investor’s effective tax rate. Plan administrators should be consulted, payroll contributions updated, and tax planning adjusted accordingly.

Expansion of Investment Options: Alternative Assets

An executive order issued in August of the previous year directed the Department of Labor (DOL) to broaden the range of investments permissible within 401(k) plans. These expanded options, termed “alternative assets,” encompass private equity, cryptocurrency, and real estate, among others. The DOL subsequently rescinded prior guidance that discouraged plan managers from offering these investments. Implementation was expected within six months of the August directive, coinciding with the release of this video.

This change means that alternative investments could begin appearing in 401(k) plans in the coming months. However, plan managers must actively choose to implement these options, and their inclusion isn’t guaranteed across all plans. Implementation is expected to be gradual. Given that 401(k) assets represent approximately 20% of the overall market – roughly $12 trillion – plan managers will likely proceed cautiously.

Perspective on Alternative Assets & the "Financial Order of Operations"

The speaker expresses reservations about the widespread inclusion of alternative assets, despite acknowledging the appeal of increased investment choices. They frame this within the context of their “Financial Order of Operations,” a nine-step wealth-building framework. Steps two, five, and six focus on retirement accounts and emphasize broad market index funds. Alternative assets like real estate and crypto are positioned as a step eight venture – appropriate after securing one’s financial future.

Implementation Details & Expected Impact

A 2025 study by Tro Price suggests that alternative assets will likely be integrated into target date funds as part of a diversified investment blend. This means investors may gain exposure to these assets without directly selecting them. However, investors won’t necessarily be forced into these options. Plan managers anticipate offering private market investments alongside traditional public market options, allowing participants to choose. Given that over 80% of participants indicated they wouldn’t actively choose these options, plan managers are unlikely to mandate their inclusion.

New participants will need to carefully select funds to avoid unintended exposure to alternative assets. Existing participants will likely not need to make immediate changes.

The Importance of Active 401(k) Management

The speaker emphasizes the importance of actively managing one’s 401(k). 401(k)s are powerful investment vehicles, offering high contribution limits, potential employer matches, and accessibility to a large portion of the workforce (70% of the private sector). In 2025, a record 654,000 Americans became 401(k) millionaires.

Despite this potential, many individuals neglect their 401(k)s. Statistics cited include: roughly one-third of Americans cash out their 401(k)s upon leaving a job, a little over one-third don’t receive their full employer match, and 46% are unaware of their investment options.

Quote: “Whether it's Roth catchups, private equity, or crypto, it's imperative that you take an active role in your 401k.”

The speaker urges viewers to review their plans, investment options, and overall financial goals to ensure alignment and maximize their retirement savings potential.

Conclusion

The 2026 changes to 401(k) plans necessitate proactive engagement from participants. Increased contribution limits offer opportunities for greater savings, but the Roth catch-up requirement for high earners requires careful tax planning. The potential inclusion of alternative assets introduces both opportunities and risks, demanding informed decision-making and a clear understanding of one’s risk tolerance and financial goals. Ultimately, actively managing one’s 401(k) remains crucial for building a secure financial future.