Vanguard, IRS send urgent message on 401(k), IRA contributions

Americans working to build a secure retirement know that every dollar they contribute to 401(k) plans and Individual Retirement Accounts (IRAs) today shapes the life they hope to enjoy tomorrow.

Whether they dream of traveling the world, supporting family, or simply living with peace of mind, people understand that retirement savingsstakes are high. Savers sense urgency around the importance of making the right moves, avoiding costly mistakes, and maximizing the nest egg they'll rely on in their post‑career lives.

After years of reporting on people's retirement worries and aspirations, I've regularly observed how deeply average Americans crave clear, trustworthy financial guidance.

Against that backdrop, two such reliable sources, the Internal Revenue Service (IRS) and The Vanguard Group, offer urgent messages for Americans stressed out about 401(k) plans and IRAs.

A 401(k) plan is a workplace‑based retirement account, meaning an employee can participate only if their company includes it as part of its benefits. Employers often match employee contributions up to a specified amount.

An IRA, by contrast, is a personal retirement vehicle that any individual is allowed to establish independently, regardless of where they work.

"Note that in order to make contributions, you must have earned income," Vanguard emphasized.

"You can have both a 401(k) and an IRA and use them together to save for retirement," Vanguard continued. "401(k) plans generally have higher contribution limits, while IRAs often offer a wider range of investment options and more personal control."

IRS explains 2026 401(k), IRA contribution limits

In 2026, the annual contribution limit to one's 401(k) plan is $24,500, subject to cost-of-living adjustments, according to the IRS.

"If permitted by the 401(k) plan, participants age 50 or over at the end of the calendar year can also make catch-up contributions. You may contribute additional elective salary deferrals of $8,000 in 2026 to traditional and safe harbor 401(k) plans," wrote the IRS.

"Under a change made in SECURE 2.0, a higher contribution limit applies for employees aged 60, 61, 62 or 63 who participate in these plans," the IRS continued. "For 2026, this higher catch-up contribution limit is $11,250."

For 2026, the total contributions one makes for the year to all of their traditional IRAs and Roth IRAs can't be more than $7,500 ($8,600 if they are age 50 or older), according to the IRS.

Vanguard describes traditional IRAs, Roth IRAs

There are two main kinds of IRAs, and the choice between a traditional IRA and a Roth IRA generally hinges on an individual's present financial circumstances and the tax bracket they expect to fall into once they retire.

"Roth IRAs offer tax-free growth and tax-free withdrawals in retirement, making them an attractive option for those who expect to be in a higher tax bracket in the future," wrote Vanguard.

"Traditional IRAs provide tax-deferred growth with pre-tax contributions, which can be beneficial for those seeking a tax break in the current tax year," Vanguard added.

More on personal finance:

• AARP raises red flag on major 401(k) problem
• Redfin predicts key housing market shift for homebuyers
• Fidelity sounds alarm on 401(k)s, IRAs, Social Security

Eligibility rules for traditional IRAs and Roth IRAs vary mainly according to a person's income and tax‑filing category.

Traditional IRAs permit contributions from anyone who has earned income, but the ability to deduct those contributions on a tax return gradually decreases at higher income levels when the individual - or their spouse - is covered by a workplace retirement plan.

Roth IRAs operate differently. They impose strict income limits that completely bar contributions once a saver's earnings exceed the allowable threshold.

"You can have both a traditional IRA and a Roth IRA, but the annual contribution limit is based on the total amount you contribute across all IRA accounts, regardless of type," Vanguard emphasized.

Roth IRA eligibility rules

As long as an individual earns taxable income and stays below the annual IRS income thresholds, they can fund a Roth IRA for the year, according to Fidelity Investments.

• Single filers can contribute the full Roth IRA amount for 2026 if their modified adjusted gross income (MAGI) is below $153,000.
• Single filers with a MAGI between $153,000 and $168,000 are permitted to make only a reduced contribution.
• Single filers whose MAGI reaches $168,000 or more are not allowed to contribute to a Roth IRA for 2026.
• Married couples filing jointly can contribute the maximum amount for 2026 if their combined MAGI is under $242,000.
• Married joint filers with a MAGI above $242,000 but below $252,000 may contribute only a partial amount.
• Married couples filing jointly with a MAGI of $252,000 or higher cannot make direct Roth IRA contributions for the 2026 tax year.
  
  (Source: Fidelity Investments)

Related: AARP sounds alarm on key 401(k), Social Security shift

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This story was originally published May 23, 2026 at 9:40 AM.