Three significant rule changes affecting U.S. retirement savers took effect in 2026, altering how high-income 401(k) participants must structure catch-up contributions, how much state and local tax can be deducted from federal returns, and what new deduction is available to Americans 65 and older, according to an analysis by Christine Benz, director of personal finance and retirement planning at Morningstar, distributed through the Associated Press.
The changes flow from two pieces of legislation: the SECURE 2.0 Act, which continues to phase in retirement account provisions, and the One Big Beautiful Bill Act, which modified tax rules beginning in 2025.
The confluence of changes means many retirement savers—particularly higher earners and those near or past retirement age—will need to revisit contribution strategies and tax planning for 2026, Morningstar said.
Roth-only catch-up contributions for high earners
The most operationally significant change for active workers requires that high-income earners over 50 who participate in 401(k) or similar company retirement plans must now direct catch-up contributions into a Roth option rather than a traditional tax-deferred account, according to Morningstar.
The requirement applies to workers with $150,000 or more in FICA income from the prior year, Benz said.
For 2026, 401(k) investors under 50 can contribute $24,500 to their company plans, Morningstar reported. Workers over 50 can add an $8,000 catch-up contribution for a total of $32,500. Workers ages 60 to 63 can make super-catch-up contributions of $11,250 on top of the $24,500 base, Benz said.
Workers whose plans lack a Roth option should consider making a full IRA contribution in addition to their baseline 401(k) contributions, according to Morningstar. The IRA contribution limit for 2026 is $8,600 for people over 50 and $7,500 for those under 50, Morningstar said. Workers who want to contribute beyond the IRA limit can direct additional funds to a taxable brokerage account, according to Benz.
Workers who prefer traditional tax-deferred contributions retain that option for the base contribution amount: the $24,500 baseline can go to a tax-deferred account, with only the catch-up portion required to flow into Roth, Morningstar said.
Higher SALT deduction
The One Big Beautiful Bill Act raised the federal cap on the deduction for state and local taxes from $10,000 to $40,000 beginning in 2025, with the higher cap set to revert to $10,000 in 2030, according to Morningstar. The higher SALT deduction phases out for taxpayers with modified adjusted gross incomes above $500,000, Benz said.
Morningstar noted implications for retirement account strategy: high earners close to the $500,000 phase-out threshold might favor contributions to traditional tax-deferred retirement plans over Roth accounts, or maximize health savings account contributions, to keep taxable income below the phase-out level. Strategies that increase taxable income—including converting a traditional IRA to a Roth—could reduce the available SALT deduction for affected taxpayers, according to Benz.
New senior deduction
Through 2028, Americans 65 and older can claim a new $6,000 deduction that is available whether they itemize or not, Morningstar reported. For married couples filing jointly where both spouses are 65 or older, the deduction doubles to $12,000, Benz said.
The deduction phases out for single filers with modified adjusted gross incomes above $75,000 and for married couples filing jointly with MAGI above $150,000, according to Morningstar. It disappears entirely for single filers with MAGI above $175,000 and for married couples with MAGI of $250,000 or more, Benz said.
Early retirees who are not yet receiving Social Security benefits or subject to required minimum distributions may have flexibility to manage taxable income in ways that qualify them for the full deduction, Morningstar said. Benz cautioned, however, that savers should weigh income-reduction tactics against other objectives, such as converting traditional IRA balances to Roth accounts.