SECURE 2.0 and Retirement Planning: What Advisors Need to Know in 2026

2026 Contribution Limits: What's new this year

The IRS makes annual inflation adjustments to retirement plan contribution limits, and this is a perfect opportunity to rethink all the ways you can help maximize your clients’ tax-advantaged savings. When you’re preparing for those client conversations, use this quick guide to reference the new 2026 limits:

*Source: IRS.gov, Notice 2025-67

Why these retirement contribution limits matter

Higher contribution limits make saving for retirement more affordable. Your clients can add more money to their retirement accounts before tax—accelerating their savings particularly in years when they’re more likely to be higher earners with fewer monthly expenses. For clients that are 50 or older, many may be earning a higher salary and have kids moving into more independent years while their mortgage is shrinking. This may be the perfect time to catch up quickly. But even for clients who are decades away from retirement, that extra amount has the potential to compound significantly over time.

In addition to accelerating tax-advantaged savings, these contribution limit increases raise some planning questions you should be prepared to address. Should your clients aim to max out their contributions and is there a certain time of year they should do that? Is there any advantage to not maxing out these limits? How do the increased catch-up contributions impact retirement readiness for your clients? What is the right mix of pre-tax vs. after-tax contributions? You might want to think about these questions in terms of each client’s unique situation.

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The Roth-only catch-up rule for higher earners

One of the bigger changes for your high-income clients is the new Roth-only catch-up rule. Starting January 1, 2026, clients who will be 50 years or older and earned more than $150,000 in FICA wages from a single employer the prior year must make catch-up contributions to their 401(k) or similar plan with that employer as Roth (after-tax) contributions. Simply put, these Highly Paid Individuals (HPIs) can no longer make pre-tax catch-up contributions and are losing the upfront deduction they may have previously received.

Note: This new rule only applies to catch-up contributions, not the base $24,500 elective deferral. The $8,000 or $11,250 catch-up portion is what needs to be Roth for HPIs. SIMPLE IRAs and SEP plans are exempt from this new requirement.

While there is an immediate tax impact because Roth contributions don’t reduce taxes now, the good news is they may create tax-free income in retirement, if IRS requirements are met. If an employer’s plan doesn’t offer a Roth option, HPIs will not be able to make catch-up contributions. As an advisor, now is the time to review your clients’ plan documents and make sure they include a Roth contribution option. You’ll also want to confirm that clients’ FICA wages (Form W-2 Box 3) will be tracked correctly and Roth-only catch-ups will be applied where required.

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Rethinking withdrawal strategies: Why the 4% rule is evolving

For the past 30 or so years, the 4% rule has been a fairly rigid guideline for retirees to understand how much to withdraw from their retirement portfolio each year, starting with 4% of their total portfolio the first year of retirement and adjusting for inflation each year after. But today’s financial landscape calls for more flexibility so advisors can pivot as needed in response to the markets, driving the best possible outcomes for their clients.

What’s changing the 4% rule?

Demographics: People are living longer but the retirement age has stayed the same, meaning retirement savings are more at risk of being depleted before they’re no longer needed.

Expected Returns: At the time the 4% rule was developed, the research reflected historical averages that are frankly less reliable today. Economic shifts such as rapid growth in AI and tech, geopolitical tensions, and changes in market policy have increased uncertainty, which is reshaping future expected returns.

Rather than a one-size-fits-all approach that can’t capture the nuances of today’s complex portfolio realities, advising clients in this environment requires flexibility and adaptive withdrawal strategies.

Flexible withdrawal strategies to consider

• Use short-term, intermediate, and long-term buckets to inform client spending strategies. Short-term needs may require lower-risk assets, while more risk is generally more tolerable with long-term spending needs.
• Review withdrawal rates annually based on inflation, market returns, and your clients’ spending needs. For example, if market conditions are poor, you can reduce the withdrawal amounts. You can even set thresholds for when to increase or decrease withdrawals relative to portfolio performance.
• Balance income and growth with a layered approach. Income layering strategies are intentionally diversified with layers of assets that mature at different times. A base layer is designed to provide predictable cash flow to meet immediate client needs, while additional layers are added for capital appreciation.

Applying a more dynamic approach to withdrawal strategies makes it easier to preserve the longevity of your clients’ assets and allow them to spend confidently when they need to or save more when they need to. You may want to use models to create scenarios for different withdrawal pathways to demonstrate how they might perform under a variety of market conditions. Then you can connect those paths to your clients’ anticipated expenses and fixed income, creating a very tailored approach to retirement spending.

Stay current on regulatory news that may impact withdrawal timing

Big incentives for small businesses

Because small businesses play a key part in expanding access to retirement plans and helping more Americans build long-term financial security, enhanced tax incentives have been established to help offset the cost of offering a plan. Communicate to your clients that this is not another compliance update; it’s a really great opportunity for small businesses to strengthen their competitive advantage.

• Enhanced start-up tax credit: Previously, small employers could claim a credit for a portion of their retirement plan start-up costs. Starting in 2026, very small businesses (50 or fewer employees) can claim a tax credit for 100% of qualified plan start-up costs, up to $5,000 per year for three years.
• Qualified costs may include setting up the plan, educating employees, and general administrative fees related to the plan setup.
• Small employers with 51-100 employees can claim a 50% credit for these same costs.
• New employer 401(k) contribution credit: SECURE 2.0 also introduced a new tax credit for employer matching contributions. Very small businesses (those with 50 or fewer employees) can claim a credit for up to $1,000 for every employee that makes less than $100,000 a year.
• The credit will be phased out over five years with 100% for the first two years.
• Auto-enrollment bonus: In addition to the start-up credit and the employer matching contribution credit, small businesses may also be eligible for an extra $500 credit each year for 3 years just for adding an automatic enrollment feature to their 401(k) or 403(b) plans.

Many small businesses may not realize how they can offset retirement plan costs dollar-for-dollar, so make sure to talk to all your small business owner clients about these SECURE 2.0 enhancements. You can also structure employer contributions to maximize the available credits and ensure initial contributions are set up to capture the full three years of startup credits. 

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Capitalizing on compliance

Go beyond just explaining the new rules and regulations to your clients; use these SECURE 2.0 changes to truly differentiate your practice by adding real strategic value and using thoughtful, effective retirement planning to help your clients achieve their long-term financial goals.

• Maximizing contribution limits. Help your clients understand and evaluate whether to use the new higher elective and catch-up limits, and show them how those savings can add up over time (or help them catch up quickly).
• Shifting more retirement savings into after-tax accounts. Understand who is affected by the new Roth-only requirement and work with them to understand the difference between pre-tax contributions and the future tax benefits of Roth distributions.
• Building more flexibility into withdrawal strategies. Break free from the 4% rule to create more dynamic withdrawal strategies tailored to each individual client’s needs and the current market environment.
• Creating a more competitive edge for your small business clients. Help small business clients use SECURE 2.0 credits to make it less of a financial burden to offer retirement plans to employees.

Looking at the new SECURE 2.0 changes as growth opportunities rather than compliance obligations sets you up for guiding clients toward stronger and more secure financial futures.

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