As we approach the new year, I’m pleased to share my annual financial planning update, tailored especially for retirees and those nearing retirement. I hope you find this information helpful as you look ahead to 2026.
First, a number of provisions from the recently enacted One Big Beautiful Bill Act (OBBBA) take effect in the coming year. Rather than repeating those details here, I encourage you to revisit my earlier post, where I highlighted key elements of the legislation and discussed how they may affect your retirement plan.
Below are additional figures to keep in mind:
- Social Security and Medicare:
- Social Security recipients will receive a 2.8% increase in their benefits for 2026.
- The basic Medicare Part B monthly premium rises to $202.90 per person. Higher-income individuals, starting at $109,000 for single filers and $218,000 for joint filers, are subject to higher premiums, known as “IRMAA” (Income Related Monthly Adjustment Amounts). Medicare Part D, the prescription drug benefit, is also subject to IRMAA thresholds. Part D premiums vary by plan, but the Centers for Medicare & Medicaid Services (CMS) projects the average amount to be $34.50.
- Marginal Federal Tax Rates:
- The top tax rate remains 37% for individual single taxpayers with taxable incomes greater than $640,600 ($768,700 for married couples filing jointly).
- Other rates include:
- 35% for taxable income over $256,225 ($512,450 for married couples filing jointly);
- 32% for taxable income over $201,775 ($403,550 for married couples filing jointly);
- 24% for taxable income over $105,700 ($211,400 for married couples filing jointly);
- 22% for taxable income over $50,400 ($100,800 for married couples filing jointly);
- 12% for taxable income over $12,400 ($24,800 for married couples filing jointly);
- 10% for taxable income for incomes of $12,400 or less ($24,800 or less for married couples filing jointly).
- Standard Deduction:
- For single taxpayers and married individuals filing separately, the standard deduction increases to $16,100 for 2026, up $350.
- For married couples who file jointly, it is $32,200, up $700.
- Heads of households will see a jump to $24,150, an increase of $525.
- Taxpayers 65 and older and those who are blind can claim an additional standard deduction. The additional standard deduction amount for 2026 is $1,650 ($2,050 if unmarried and not a surviving spouse).
- Additional Senior Deduction:
- The recently enacted OBBBA introduced a new bonus deduction of $6,000 for those age 65 and older ($12,000 if both spouses are 65 or older and file jointly), available to taxpayers regardless of whether they claim the standard deduction or itemize deductions. The bonus deduction begins to phase out for those with modified adjusted incomes above $150,000 on joint returns and $75,000 on single and head-of-household returns. The provision is currently in effect for tax years 2025-2028.
- Alternative Minimum Tax (AMT)
- The AMT exemption amount for tax year 2026 for single filers is $90,100 and begins to phase out at $500,000 ($140,200 for married couples filing jointly, with the exemption beginning to phase out at $1,000,000).
- Investment and Retirement:
- Long-term capital gains and qualified dividends continue to be taxed at rates of 0%, 15%, or 20%, depending on overall taxable income. These figures do not include the 3.8% Medicare surtax on so-called net investment income for singles earning more than $200,000 and couples earning more than $250,000, as mandated under the Affordable Care Act.
- The maximum IRA contributions increase to $7,500 (from $7,000) for those younger than 50 and $8,600 (from 8,000) for those age 50 and up.
- Eligibility income ceilings for Roth IRA contributions increase, with contributions phasing out at adjustable gross income thresholds of $242,000 (up from $236,000) to $252,000 (up from $246,000) for married couples filing jointly, and $153,000 (up from 150,000) to $168,000 (up front $165,000) for single filers.
- Workplace retirement plan contribution limits:
- The annual employee contribution limit for 401(k), 401(b) and most 457 plans increases to $24,500 (from $23,500) for participants under age 50.
- For participants age 50 and older, the limit rises to $32,500 (from $31,000), reflecting the standard $7,500 catch-up contribution.
- Individuals ages 60 to 63 may contribute even more, up to a total of $35,750 under the enhanced “super catch-up” provision.
- For 403(b) plans, participants with more than 15 years of service may qualify for an additional special catch-up contribution of $3,000 per year, up to a lifetime maximum of $15,000.
- As mandated by the SECURE 2.0 Act of 2022, plan participants who earned more than $150,000 in FICA wages in 2025 will be required to make all catch-up contributions as Roth contributions beginning in 2026.
- Contribution limits on profit-sharing plans and SEP-IRAs increase to $72,000 (from $70,000). For those age 50 and above, the limit increases to $80,000 (from $77,500), but only for those who use profit-sharing plans (SEP-IRAs do not permit so-called “catch-up” contributions).
- The amount individuals can generally contribute to SIMPLE retirement plans increases to $17,000 (from $16,500). Those age 50 and over can make a catch-up contribution of $4,000 (up from $3,500); the higher catch up limit for those age 60 to 63 remains $5,250.
- Qualified Charitable Distribution (QCD):
- IRA owners aged 70 ½ and older are entitled to make tax-free distributions to qualified charities, up to a certain amount annually. In 2026, the aggregate threshold increases to $111,000 from $108,000. Married couples in which both spouses qualify may each give up to the individual limit, allowing a combined total of up to $222,000.
- For the 2025 tax year, the IRS has introduced a new Code Y for Form 1099-R to identify QCDs. However, the use of this code by financial institutions is optional for the upcoming tax reporting season due to implementation challenges.
- Health Savings Accounts (HSA):
- HSA contribution thresholds increase to $4,400 for individuals and $8,750 for families. Those aged 55 (note, not 50) and older are eligible to make an additional $1,000 catch-up contribution (which is not adjusted for inflation).
- Estate and Gift Tax:
- As a result of the OBBBA, the federal estate, lifetime gift, and generation-skipping tax exclusions increase to $15,000,000 per person ($30,000,000 per married couple). The top tax rate remains 40%.
- Annual Gift Tax Exclusion:
- The annual gift tax exclusion, representing the amount one can give to another person without it counting against the lifetime exclusion, remains $19,000.
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As always, please feel free to reach out directly with any questions or comments. Wishing you and your loved ones a joyful holiday season and a healthy, fulfilling year ahead.
Sources: IRS.gov, Kiplinger’s Tax Letter, U.S. Centers for Medicare and Medicaid Services, Wall Street Journal.
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