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Retirement Planning

Retirement Planning Basics: Accounts, 2026 Limits, and a Common Savings Order

Retirement planning estimates future spending, subtracts income like Social Security, and fills the gap using tax-advantaged accounts over time.

Retirement Planning Basics: Accounts, 2026 Limits, and a Common Savings Order

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What is retirement planning?

  • Retirement planning estimates what you'll spend each year once you stop working and how that spending will be paid for.
  • Social Security, pensions, or part-time work cover some of it; savings and investments have to cover the rest.
  • Tax-advantaged accounts such as 401(k)s, IRAs, and HSAs are the main tools, because tax savings can add up over decades.
  • The earlier and more consistently you save, the more time contributions have to grow, although investment returns are never assured.
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Full Guide

What is retirement planning?

  • Retirement planning estimates what you'll spend each year once you stop working and how that spending will be paid for.
  • Social Security, pensions, or part-time work cover some of it; savings and investments have to cover the rest.
  • Tax-advantaged accounts such as 401(k)s, IRAs, and HSAs are the main tools, because tax savings can add up over decades.
  • The earlier and more consistently you save, the more time contributions have to grow, although investment returns are never assured.

Estimating how much you will need

  • Start with expected annual spending in today's dollars, then subtract expected Social Security and any pension.
  • The remaining gap, multiplied across a retirement that may last 30 years or more, sets the size of the savings target.
  • Withdrawal-rate rules of thumb, such as about 4% a year, come from historical research and are rough starting points, not assured outcomes.
  • Budget separately for health insurance before Medicare starts at 65 and for inflation over a long retirement.

Which accounts can you use, and what are the 2026 limits?

  • 401(k), 403(b), and most 457(b) plans: $24,500 of employee deferrals, plus $8,000 catch-up at 50+ or $11,250 at ages 60 to 63.
  • IRAs: $7,500, plus a $1,100 catch-up at 50+; Roth IRA eligibility phases out between $153,000 and $168,000 single, or $242,000 and $252,000 joint.
  • Health savings accounts, if you have a qualifying high-deductible plan: $4,400 self-only or $8,750 family, plus $1,000 at 55+.
  • Some 401(k) plans also accept after-tax contributions, up to a combined plan limit of $72,000 including employer money.

Should contributions go in pre-tax or Roth?

  • Pre-tax contributions lower taxable income now, and withdrawals are taxed as ordinary income later.
  • Roth contributions are taxed now, and qualified withdrawals, including growth, come out tax-free later.
  • The choice often turns on whether your tax rate is higher now or is likely to be higher in retirement, which is uncertain.
  • SECURE 2.0 lets plans offer Roth employer contributions, and from 2026, catch-ups for those with prior-year FICA wages above $150,000 must be Roth.

A commonly used order for funding accounts

  • Many start by contributing enough to receive the full employer match, since unmatched dollars forgo part of their pay.
  • Next, high-interest debt and an emergency reserve often come before additional investing.
  • Then comes an HSA if eligible, an IRA or backdoor Roth IRA, and additional 401(k) deferrals up to the limit.
  • After-tax 401(k) contributions and taxable brokerage accounts typically come last, with the brokerage account offering the most flexibility.

Rules for accessing the money

  • Withdrawals from retirement accounts before 59½ generally owe a 10% additional tax on top of income tax, with specific exceptions.
  • Exceptions include leaving an employer in or after the year you turn 55 (for that plan) and a series of equal periodic payments.
  • Roth IRA contributions can be withdrawn anytime; earnings are tax-free after 59½ if at least five years have passed since your first Roth IRA contribution.
  • Required minimum distributions from pre-tax accounts begin at 73, or 75 for people born in 1960 or later.

Key takeaways

  • A retirement plan starts with a spending estimate, then uses savings to fill the gap left by Social Security and other income.
  • 2026 limits are $24,500 for 401(k) deferrals and $7,500 for IRAs, with larger catch-ups for older savers.
  • Pre-tax versus Roth is a bet on future tax rates, and many people hold some of each.
  • This is educational only; limits change yearly, so confirm current figures and your tax situation with a CPA.
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