401(k) Limit Increases to $25,500 for 2027, IRA Limit Stays at $7,500

The IRS on November 12 announced the annual contribution limits for qualified defined contribution plans and individual retirement accounts for the 2027 tax year.

The annual contribution limit for workers who participate in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, will be increased to $25,500, up from $24,500 in 2026.

DC plan contribution limits grow in step with the annual inflation rate for each year’s third quarter—this year’s was 3.7%—rounded down to the nearest $500 increment.

Catch-up contributions for DC plan investors aged 50 and older increased to $8,500 from $8,000 in 2026, adding up to a total allowed annual contribution of $34,000 for qualifying DC plans in 2027.

The annual IRA contribution limit is staying at $7,500. The IRA catch‑up contribution limit for individuals aged 50 and older will remain at $1,100, though the IRS noted that the catch-up was amended under the SECURE 2.0 Act of 2022 to include an annual cost‑of‑living adjustment.

The income eligibility range for IRAs likewise increased for 2027.

The limit for catch-up contributions to most employer plans that applies for individuals who turn 60, 61, 62 or 63 in 2027 is $11,750.

The tax-deferred savings limit for pension-linked emergency savings accounts that may be included in certain types of defined contribution plans increased to $2,700 from $2,600.

The Saver’s Match, a new retirement savings incentive created by the SECURE 2.0 Act of 2022 that generally replaces the Saver’s Credit and allows eligible low- and moderate-income individuals to receive a federal matching contribution of up to $1,000 based on their retirement savings contributions, is scheduled to become effective for taxable years beginning after December 31, 2026.

Traditional IRAs

For single taxpayers in a workplace plan, the phase-out range for traditional IRAs will increase to between $83,000 and $93,000, up from between $81,000 and $91,000 for 2026. For married couples, the amount will increase to between $133,000 and $153,000, up from between $129,000 and $149,000 for 2026.

For a traditional IRA contributor not covered by a workplace retirement plan and married to someone who is covered, the phase-out range will increase to between $250,000 and $260,000, up from between $242,000 and $252,000 for 2026.

For a married individual covered by a workplace retirement plan and filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and will remain between $0 and $10,000.

Roth IRAs

The income phase-out range for taxpayers making contributions to a Roth IRA will increase to between $158,000 and $173,000 for singles and heads of household, up from between $153,000 and $168,000.

For married couples filing jointly, the income phase-out range will increase to between $250,000 and $260,000, up from between $242,000 and $252,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and will remain between $0 and $10,000.

Other Phase-Out Ranges

The amount individuals can contribute to a SIMPLE retirement account will be increased to $17,500, up from $17,000. From a change made in SECURE 2.0, individuals can contribute a higher amount to certain applicable SIMPLE [Savings Incentive Match Plan for Employees] retirement accounts. For 2027, this higher amount increased to $19,100 up from $18,100.

The catch-up contribution limit that applies to employees aged 50 and older who participate in most SIMPLE plans remains $4,000 last year. Under a change made in SECURE 2.0, a different catch-up limit applies for employees aged 50 and older who participate in certain applicable SIMPLE plans. For 2027, this limit remains $3,850. In addition, a higher catch-up contribution limit applies for employees aged 60 through 63 who participate in SIMPLE plans. For 2027, this higher catch-up contribution limit also remains at $5,250.

The minimum threshold for employees to qualify as a highly compensated employee increased to $170,000 from $160,000.

The full notice can be found here.

Health and Welfare Plan Adjustments

Earlier this month, the IRS released several annual inflation adjustments for health and welfare plans for 2027.

Next year, the dollar limit for voluntary employee salary reductions for contributions to flexible spending arrangements is $3,500, up $100 from 2026. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $700, an increase of $20 from 2026.

In 2027, self-coverage-only participants with medical savings accounts, which are available to people enrolled in high-deductible Medicare plans, must have an annual deductible of at least $3,000, up $100 from 2026, but not more than $4,550, an increase of $150 from 2926. The maximum out-of-pocket expense amount is $6,050, up $200 from 2026.

The annual deductible for medical savings account participants with family coverage must be at least $6,050, up from $5,850 in 2026, but no more than $9,050, up from $8,750 in 2026. For family coverage, the out-of-pocket expense limit Is $11,050 for 2027, an increase of $250 from 2026.

For 2027, the maximum amount of employers can claim for the Employer-Provided Childcare Tax Credit will rise to $515,943.67, up from $500,000 in 2026, or $619,132.40 if the employer is an eligible small business.

The IRS in June announced inflation-adjusted limits for health savings accounts and related health benefit arrangements for next year. The contribution limit for HSAs will increase to $4,500 from $4,400 for 2026.