For superannuation savers and retirees, the new year brings more than the usual inflation adjustments to superannuation contributions. Retirement legislation known as Secure 2.0 will also continue to apply, and the One Big Beautiful Bill will have impacts as well.
Here’s a summary of three key changes and some moves to consider.
Thanks to a provision in the Secure 2.0 retirement legislation, high earners (those with $150,000 or more in FICA income in the previous year) who are over age 50 and invest in a 401(k) or other company retirement plans must make Roth-option catch-up contributions to their plans, instead of traditional tax-deferred contributions, starting this year.
For 2026, 401(k) investors under age 50 can contribute $24,500 to their company plans, plus $8,000 in catch-up contributions if they’re over age 50, for a total of $32,500. In addition, people between the ages of 60 and 63 can do this “Super-catch-up” contributions.: $11,250 plus $24,500.
Possible Action Items: Some 401(k) plans may not have a Roth option, so these participants should instead consider making a full IRA contribution in addition to their basic 401(k) contributions ($24,500). This year, the maximum IRA contribution is $8,600 for people over 50 and $7,500 for those under 50. If you can invest more than that, direct the excess into a taxable brokerage account.
A separate issue is how 401(k) investors should proceed if their goal is to make traditional tax-deferred contributions rather than Roth. Secure 2.0 forces older workers with higher incomes to join a Roth, at least with the catch-up portion of their contributions. In this case, workers can contribute the 401(k) basis limit ($24,500) to the traditional tax-deferred option, with catch-up contributions directed to the Roth option.
Thanks for ObaTaxpayers can now deduct a larger amount in state and local taxes. The maximum SALT deduction has been increased from $10,000 to $40,000 starting in 2025. It will return to $10,000 in 2030.
Potential Action Items: How does this relate to retirement? The SALT deductible is phased out for high-income taxpayers — those with adjusted gross income of more than $500,000. High earners should consider ways to get under $500,000 if they are close. They may prefer contributions to traditional tax-deferred retirement plans rather than a Roth or max out their health savings accounts. Qualifying for a higher SALT tax deduction may also argue against strategies that increase income, such as converting traditional IRAs to a Roth.
Of course, don’t miss the forest for the trees. Strategies like making Roth contributions or converting IRA accounts may make sense in the long run, even if they limit the deductibility of SALT.
Through 2028, people 65 and older can take advantage of a new $6,000 deduction. It’s available whether you file or not and doubles to $12,000 for married couples filing jointly, assuming you’re both 65 or older. For non-itemizers, the new deduction will stack on top of standard deductions.
Here’s what the discounts look like this year:
1. Individual filers (standard deduction): $16,100
2. Solo bloggers over 65: $16,100 + $2,050 + $6,000 = $24,150
3. Married couples filing jointly (standard deduction): $32,200
4. Couples over 65 years old filing jointly: USD 32,200 + USD 1,650 x 2 + USD 6,000 x 2 = USD 47,500
High-income seniors, note: Income limits apply. The deduction is reduced for single filers with modified adjusted gross income of more than $75,000 and married couples filing jointly with MAGI of more than $150,000. This deduction disappears completely for individuals with a MAGI of more than $175,000 and married couples filing jointly with a MAGI of $250,000 or more.
Potential Action Items: Early retirees who have a great deal of control over their taxable income levels because they have not yet received Social Security or are subject to required minimum distributions may be tempted to try to keep their MAGI low to qualify for the full deduction. But it’s wise to balance these goals along with other worthwhile tactics, such as converting traditional IRA balances to a Roth.
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This article was provided to The Associated Press by Morningstar. For more retirement content, go to https://www.morningstar.com/retirement.
Christine Benz He is Director of Personal Finance and Retirement Planning at Morningstar.