IRS 2027 Retirement Plan Limits Take Effect January 1, 2027, With 401(k) Limit at $25,500

On November 12, 2026, the Internal Revenue Service (IRS) announced the 2027 cost-of-living adjustments for retirement plans and individual retirement arrangements (IRAs) in news release IR-2026-136 and Notice 2026-66. The new limits take effect January 1, 2027. The employee contribution limit for 401(k), 403(b) and governmental 457 plans and the federal Thrift Savings Plan rises to $25,500, up from $24,500 for 2026.

The annual IRA contribution limit stays at $7,500. The IRA catch-up limit for individuals age 50 and older also stays the same, at $1,100.

New Contribution Limits for Workplace Plans in 2027

The general catch-up limit for employees age 50 and older in most 401(k), 403(b) and governmental 457 plans and the Thrift Savings Plan rises to $8,500, up from $8,000. With the higher base limit, those participants can generally contribute up to $34,000 in 2027.

A higher catch-up limit created by the SECURE 2.0 Act of 2022 applies to employees who are age 60, 61, 62 or 63. For 2027, that limit is $11,750, up from $11,250. Notice 2026-66 also raises the wage threshold that decides whether a participant's catch-up contributions must be designated as Roth contributions, from $150,000 to $155,000.

For SIMPLE retirement accounts, the general contribution limit rises to $17,500, up from $17,000. The higher limit for certain applicable SIMPLE plans rises to $19,100, up from $18,100. The SIMPLE catch-up limits stay at $4,000 generally, $3,850 for certain applicable SIMPLE plans and $5,250 for participants age 60 through 63.

Employer Plan Limits and the Legal Basis for the Adjustments

Section 415 of the Internal Revenue Code limits the benefits and contributions allowed under qualified retirement plans. Section 415(d) requires the Treasury to adjust those limits each year for increases in the cost of living, and other deferred compensation amounts are adjusted under a similar method.

For 2027, the limit on total annual additions to a defined contribution plan rises from $72,000 to $75,000. The annual benefit limit for a defined benefit plan rises from $290,000 to $300,000. The annual compensation limit that a plan may take into account rises from $360,000 to $375,000.

The compensation threshold for a highly compensated employee rises from $160,000 to $170,000. The threshold for a key employee under the top-heavy plan rules rises from $235,000 to $245,000. Employers, including small businesses that sponsor 401(k) or SIMPLE plans, use these figures for plan testing and payroll setup.

IRA Deduction and Roth IRA Income Ranges

The income ranges that phase out the traditional IRA deduction and Roth IRA contributions both rose for 2027. For single taxpayers covered by a workplace retirement plan, the deduction phase-out range is now $83,000 to $93,000, up from $81,000 to $91,000.

For married couples filing jointly, when the spouse making the IRA contribution is covered by a workplace plan, the range is $133,000 to $153,000, up from $129,000 to $149,000. When the contributor is not covered but is married to someone who is, the range is $250,000 to $260,000, up from $242,000 to $252,000.

The Roth IRA income phase-out range is $158,000 to $173,000 for singles and heads of household and $250,000 to $260,000 for married couples filing jointly. The range for a married individual filing a separate return is not adjusted for inflation and remains $0 to $10,000.

Charitable Distribution Limits Tied to IRAs

Notice 2026-66 raises the annual cap on qualified charitable distributions from IRAs that are excluded from gross income, from $111,000 to $114,000. The amount allowed under the one-time election for a qualified charitable distribution made directly to a split-interest entity rises from $55,000 to $57,000.

The higher caps apply to IRA owners who make charitable gifts directly from their accounts in 2027, including retirees in Melbourne and Palm Bay who include those gifts in an estate plan.