We are already one-third of the way through 2026. As those in the workforce think about retirement, it is time to understand the changes for this year and start planning for the future.
Tax laws change every year. There are always updates in terms of tax deductions, retirement plan contributions, and more, and these changes can affect how you plan for retirement.
New Retirement Contribution Limits for 2026
Many Colorado residents have retirement plans such as IRAs and 401(k)s. It is important to be aware of the new limits for this year so you can save more for retirement. Here are the updated limits:
| Plan | 2025 Limit | 2026 Limit |
| 401(k) – standard employee contribution limit | $23,500 | $24,500 |
| Catch-up contributions (for those ages 50+) | $7,500 | $8,000 |
| Total employer and employee limit | $70,000 | $72,000 |
| Traditional and Roth IRA | $7,000 | $7,500 |
| IRA catch-up (for those ages 50+) | $1,000 | $1,100 |
Higher contribution limits give you more room to build your retirement savings in a tax-advantaged way. You can contribute more to your retirement accounts before taxes, which can help you accelerate your savings, especially during years when your income is higher and your monthly expenses may be lower.
If you are over the age of 50, this can be an especially valuable opportunity. You may be in your peak earning years, your kids may be more financially independent, and your mortgage may be shrinking. All of that can free up extra cash, making it the perfect time to take advantage of catch-up contributions and boost your retirement savings. But even if retirement is still decades away, increasing your contributions now can make a big difference thanks to long-term compounding.
Of course, higher limits also come with important planning decisions. Should you aim to max out your contributions every year? Does it matter when during the year you contribute? Are there situations where it actually makes sense not to contribute the maximum? How do catch-up contributions factor into your overall retirement? These are questions to discuss with a financial advisor based on your own financial picture, goals, and timeline.
Roth-Only Catch-Up Rule For Higher Earners
One of the biggest changes for 2026 affects higher-income savers. Starting January 1, 2026, if you are age 50 or older and earned more than $150,000 from a single employer the year before, your catch-up contributions must be made as Roth (after-tax) contributions.
This means you can no longer use pre-tax dollars for those extra catch-up amounts. You will not get the immediate tax break you may have been used to, but your withdrawals in retirement can be tax-free.
It is important to note that this rule only applies to the catch-up portion, not your regular contributions. Also, this rule does not apply to every plan. SIMPLE IRAs and SEP plans are not affected by this change.
Incentives for Small Businesses
Tax incentives have been established to help small businesses that want to offer retirement plans offset the cost of offering a plan:
- Enhanced start-up tax credit: Starting in 2026, small businesses (50 or fewer employees) can claim a tax credit for 100% of qualified plan start-up costs, up to $5,000 per year for three years. Qualified costs include setting up the plan, educating employees, and general administrative fees. Employers with 51 to 100 employees can claim a 50% credit for these same costs.
- New employer 401(k) contribution credit: Small businesses with under 50 employees can claim a credit for up to $1,000 for every employee who makes less than $100,000 a year. This credit will be phased out over five years.
- Auto-enrollment bonus: Small businesses may also be eligible for an extra $500 credit each year for three years for adding an automatic enrollment feature to their 401(k) or 403(b) plans.
Colorado Retirement Income Tax
Colorado has some meaningful protections for retirees. Here are some state-specific retirement laws and other information for those who are preparing to retire in Colorado:
- If you are 65 or older: You can exclude up to $24,000 of pension or annuity income from your Colorado taxable income. On top of that, any Social Security benefits that are taxed at the federal level can generally be fully deducted on your Colorado return.
- If you are between 55 and 64: You can exclude up to $20,000 of pension or annuity income. Starting in 2025, you may also be able to fully deduct your federally taxed Social Security benefits, but only if your income stays below certain limits: $75,000 for single filers or $95,000 for married couples filing jointly. If you earn more than that, the $20,000 cap still applies.
- If you are under 55: Most retirees do not qualify for these exclusions yet. However, military retirees can exclude up to $15,000 of military retirement pay.
- For military retirees specifically: Colorado has its own set of rules for taxing military retirement income. These do not follow the same age-based guidelines listed above, so it is important to follow the state’s specific guidance rather than assuming all military retirement income becomes tax-free at a certain age.
- What to know about Social Security taxes: Social Security benefits are treated differently depending on your age and income. If you are 65 or older, you can generally deduct all federally taxed benefits. If you are between 55 and 64, you may also qualify for a full deduction, but only if your income falls within the state’s limits. Otherwise, the standard $20,000 retirement income exclusion applies.
Contact Us Today
Planning for retirement can be exciting, but it is far from easy. There are so many elements to consider, and planning can be complicated when there are constant updates.
Start planning for your future now with help from a Colorado attorney from Ragab Law Firm, P.C. We can assist with estate planning, business planning, and other legal matters to protect you and your family’s financial future. Schedule a consultation with our office to learn more. Fill out the online form or give us a call at (720) 776-8853.
