Retirement planning isn’t just about securing your financial future — it’s also one of the smartest tax-moves you can make right now. By contributing to the right retirement plans and taking full advantage of deduction limits, you can lower your taxable income today while building wealth for tomorrow. In this post, we’ll walk you through the updated limits for 2025–26, how they work, and how you can make them work for you.
1. The Big Picture: Why Retirement Plan Deductions Matter
When you contribute to eligible retirement plans — whether via an employer-sponsored 401(k) or a personal IRA — you’re often able to reduce your taxable income for the year. That means less tax today and more investment potential for tomorrow. For many individuals, especially those looking to optimise tax-efficiency and accelerate savings, tapping into these plans is foundational to smart financial planning.
2. 2025–2026 Deduction & Contribution Limits
401(k) & similar plans
According to the Internal Revenue Service (IRS), for 2026 the employee elective deferral limit for 401(k), 403(b), and most 457 plans rises to $24,500, up from $23,500 in 2025. IRS+2NAPA Net+2 Meanwhile, catch-up contributions (age 50 +) rise to $8,000 in 2026 (up from $7,500 in 2025).
IRA limits
For individual retirement arrangements (IRAs), the limit for 2026 is $7,500 (up from $7,000) with a $1,100 catch-up for those 50 or older.
Why it matters: Even small increases in contribution limits can translate into meaningful tax savings — and the earlier you act, the more benefit you capture.
3. Choosing the Right Plan for You
Here’s a breakdown of common plans and when they make sense:
- Traditional IRA: Contributions may be deductible today (subject to income and coverage rules).
- Roth IRA: Contributions are taxed now, but withdrawals are tax-free in retirement; less immediate deduction but potential long-term benefit.
- 401(k) / 403(b) / 457 plans: Employer-sponsored; larger contribution limits; ideal when you have an employer plan.
- Solo 401(k) / SEP IRA (for self-employed or small business owners): Higher contribution opportunities — see our blog on business retirement plans for more details.
Decision factors:
- Your current tax bracket and expected future tax bracket
- Whether your employer offers matching contributions
- Your cash-flow and ability to contribute
- Your retirement timeline
A simple checklist:
- If you’re earning a high income now and expect to earn less later → Traditional contributions may make more sense
- If you expect your tax rate to increase or retire with higher income → Roth contributions may pay off
- If you’re self-employed or own a small business → explore Solo 401(k) or SEP options
4. Common Mistakes to Avoid
- Waiting too long: Some people assume “I’ll worry about retirement contributions next year.” But contribution limits and tax-laws update annually — acting early is better.
- Exceeding limits: Over-contributing triggers penalties or forced corrective distributions. Confirm plan limits and eligibility.
- Ignoring employer plans: If your employer offers a 401(k) match, not participating is leaving free money on the table.
- Not coordinating multiple accounts: If you have both IRAs and employer plans, contribution strategy needs coordination to maximise deductions and benefits.
5. Practical Steps Before Year-End
Here’s how you can act now:
- Review your 2025 year-to-date earnings and withholding.
- If you’re under age 50, aim to contribute up to the standard limit; if over 50, plan for the catch-up.
- Maximise employer plan contributions where available.
- If self-employed, evaluate Solo 401(k)/SEP options.
- Document everything: contribution receipts, plan statements, employer match details.
- Book a consultation with MyTaxFiler to map your plan and ensure you don’t miss deadlines.
6. How MyTaxFiler Can Help
At MyTaxFiler, we specialise in helping individuals navigate retirement-tax planning. From selecting the right retirement plan to executing contributions and deductions, our advisors work alongside you. Whether you’re 30 and just starting, 45 and accelerating savings, or 55 and playing catch-up — we’ve got you covered.
Conclusion
Retirement plan deductions aren’t just about retirement — they’re about taking smart tax action today. With updated limits for 2025-26 and the right plan strategy, you can reduce taxable income, boost savings, and move closer to your financial goals. Don’t wait until April — make the move now.
Ready to optimise your retirement plan and maximise your deductions? Book a Retirement Tax Planning Consultation with MyTaxFiler today.