Americans Can Save More for Retirement in 2027 as IRS Raises Contribution Limit: Frank Bisignano Says It Helps Families ‘Keep More of Their Hard-Earned Income’

Americans will be able to put an additional $1,000 toward retirement through their 401(k) plans in 2027, with the annual contribution limit rising to $25,500 from $24,500 in 2026.

A 401(k) is a workplace retirement savings plan that lets employees set aside part of their paychecks for retirement. The higher limit gives workers more room to build those savings, while older employees will also be allowed to make larger additional contributions.

The Internal Revenue Service announced the changes on Thursday, as part of its annual cost-of-living adjustments. IRS CEO Frank J. Bisignano said the increase, along with the Working Families Tax Cuts, would help American families "keep more of their hard-earned income."

The same $25,500 annual contribution limit will apply to 403(b) plans, most government 457 plans and the federal Thrift Savings Plan, in addition to 401(k) plans.

Older Workers Get Higher Catch-Up Limits

The catch-up contribution limit for most workplace plans will rise to $8,500 from $8,000 for workers aged 50 and older. Eligible workers in this group can generally contribute up to $34,000 each year starting in 2027. Those aged 60 to 63 can make a higher catch-up contribution of $11,750.

The annual IRA contribution limit will remain $7,500, with the $1,100 catch-up limit for savers aged 50 and older unchanged.

The income phase-out range for Roth IRA contributions will increase to $158,000-$173,000 for single filers and heads of household, and $250,000-$260,000 for married couples filing jointly.

The contribution limit for most SIMPLE retirement accounts will increase to $17,500 from $17,000. For certain eligible SIMPLE accounts, the limit will rise to $19,100 from $18,100.

Suze Orman Urges Workers To Increase Retirement Savings

The higher limits come as personal finance expert Suze Orman urges workers, particularly younger savers, to increase retirement contributions despite household expenses. She suggested raising 401(k) contribution rates by 1 or 2 percentage points in 2027.

Orman warned that workers may find it "harder, not easier" to boost savings as they age, citing caregiving costs, support for adult children and unexpected career disruptions.

Image via Shutterstock