Tax-advantaged accounts, US
401(k), IRA, Roth and HSA in 2026: the limits, the differences, and the order to fill them
A tax-advantaged account is the same investment with a tax break attached. The breaks differ, and so do the limits, which the IRS adjusts every year. Here are the 2026 figures from the IRS's own notices, and a simple order for using them.
The short version
- 2026 limits: $24,500 in a 401(k), $7,500 in IRAs, $4,400 or $8,750 in an HSA, with catch-ups from age 50 (or 55 for the HSA).12
- Traditional accounts cut this year's tax; Roth accounts make withdrawals in retirement tax-free. An HSA does both if the money goes to medical costs.
- A common order: the 401(k) up to the employer match, then the HSA, then an IRA, then the rest of the 401(k), then a taxable account.
- The tax break is worth the most on money you would have invested anyway. Fill the accounts with the same broad, low-cost funds you would hold outside them.
The 2026 limits
The IRS announced the 2026 retirement limits in November 2025 and the HSA limits in May 2025. The employee limit for 401(k), 403(b), most 457 plans and the federal Thrift Savings Plan rose to $24,500. The IRA limit rose to $7,500, and the IRA catch-up for people 50 and over is now indexed, at $1,100.1 HSA limits are $4,400 for self-only coverage and $8,750 for family coverage.2
| Account | 2026 limit | Age 50+ catch-up | Notes |
|---|---|---|---|
| 401(k), 403(b), 457, TSP | $24,500 | $8,000 ($11,250 at 60–63) | Employee deferrals; employer contributions are extra |
| Traditional and Roth IRA (combined) | $7,500 | $1,100 | Roth has income limits; traditional deduction has income limits if you have a workplace plan |
| HSA, self-only coverage | $4,400 | $1,000 from age 55 | Needs a high-deductible plan: deductible at least $1,700, out-of-pocket cap $8,500 |
| HSA, family coverage | $8,750 | $1,000 from age 55 | Deductible at least $3,400, out-of-pocket cap $17,000 |
| SIMPLE IRA | $17,000 | $4,000 | Small-employer plans; some plans allow $18,100 |
Sources: IRS IR-2025-111 and Notice 2025-67;1 IRS Rev. Proc. 2025-19;2 HSA catch-up from Internal Revenue Code section 223.3 The higher 60-to-63 catch-up is optional for plans.
Traditional, Roth, and the HSA
Every account here shelters investment growth from tax while the money stays inside. They differ in when the tax is paid.
Traditional 401(k) and traditional IRA
Contributions reduce this year's taxable income. Withdrawals in retirement are taxed as ordinary income, and generally there is a 10% penalty before age 59½ with some exceptions. If you or your spouse has a workplace plan, the deduction for a traditional IRA phases out with income: for 2026, between $81,000 to $91,000 for single filers covered by a plan, and $129,000 to $149,000 for a covered spouse filing jointly ($242,000 to $252,000 if only the other spouse is covered).1
Roth 401(k) and Roth IRA
Contributions are made with money already taxed. Qualified withdrawals, including all the growth, are tax-free. A Roth IRA can be contributed to only below an income limit: for 2026 the phase-out is $153,000 to $168,000 for single filers and heads of household, and $242,000 to $252,000 for married couples filing jointly.1 A Roth 401(k) has no income limit. Roth contributions (not earnings) to an IRA can be withdrawn at any time without tax or penalty, which makes a Roth IRA a reasonable second-tier emergency reserve once a cash fund exists.
Health savings account
An HSA is the only account with three breaks: contributions are deductible, growth is untaxed, and withdrawals for qualified medical expenses are tax-free. It requires a high-deductible health plan, and the money rolls over year to year. After 65, withdrawals for anything are taxed like a traditional IRA, with no penalty. If you can pay current medical bills from cash and let the HSA invest, it works as a retirement account with a medical bonus.23
Which to choose
The rule of thumb: pay tax when your rate is lowest. Early in a career, or in any low-income year, Roth contributions lock in a low rate. In peak earning years, traditional contributions avoid a high rate now. Many people hold both, which also leaves a choice of which to draw from in retirement. The Saver's Credit adds a direct credit for lower incomes: in 2026 it is available up to $80,500 of income for joint filers, $60,375 for heads of household, and $40,250 for singles.1
A sensible order
- 401(k) up to the full employer match. A 50% or 100% match is an immediate return no investment offers. The SEC's Investor.gov puts this first for a reason.4
- Clear high-interest debt and fund a cash cushion. Card interest above 20% beats any expected market return. Our guide on credit card debt covers the order.
- HSA, if you have a high-deductible plan. Three tax breaks and no use-it-or-lose-it rule.
- IRA, Roth or traditional, to the limit. An IRA usually offers lower-cost funds than a workplace plan.
- The rest of the 401(k) limit.
- A taxable brokerage account for anything beyond that, with index funds that distribute little taxable income.
Automating each step is the habit that makes the order hold; see our guide on money habits that last. What to put inside the accounts is a separate question, and the long-run record in our guide on S&P 500 returns is the usual starting point.
Common mistakes
- Leaving the match on the table. Contributing less than the match threshold forfeits part of your pay.
- Holding cash in the account. Money contributed to an IRA or HSA sits in cash until you choose investments. Check.
- Cashing out when changing jobs. A direct rollover to an IRA or the new plan keeps the tax shelter; a cheque to you can trigger tax and the 10% penalty.
- Exceeding a limit. Contributions across all IRAs count toward one $7,500 limit; two jobs' 401(k)s count toward one $24,500 limit. Excess contributions carry a 6% tax each year they stay in.
- Ignoring fees. Plan and fund fees compound against you for decades. A fund charging 0.05% and one charging 0.75% hold the same stocks.
Canadian readers have a parallel set of accounts with different rules; see TFSA, RRSP, FHSA and RESP in 2026.
Sources
- Internal Revenue Service. IR-2025-111: 401(k) limit increases to $24,500 for 2026; IRA limit increases to $7,500 (Notice 2025-67)
- Internal Revenue Service. Revenue Procedure 2025-19: 2026 inflation-adjusted amounts for health savings accounts
- Legal Information Institute, Cornell Law School. 26 U.S. Code § 223, Health savings accounts (additional contributions for individuals 55 or older)
- U.S. Securities and Exchange Commission, Investor.gov. Retirement toolkit: first job
This guide is general information, not financial, tax, or investment advice. Rules and limits change; check the sources for the current figures before acting.
Keep reading
-
63%of US adults could cover a $400 surprise with cash
Habits
Money habits that last
Ten habits, in order, that turn good intentions into money kept: automatic saving, an emergency fund, a monthly check of where the money went, and investing on a schedule.
8 min read · Updated October 2026
-
10.0%a year, 1928–2025, dividends reinvested
Investing
What 98 years of S&P 500 returns say
Calendar-year S&P 500 total returns from 1928 to 2025: the average, how often a year lost money, and what happened over every 10-, 20- and 30-year stretch. With the 2026 figures so far.
9 min read · Updated October 2026
-
$109,000of TFSA room since 2009 if you never contributed
Tax-advantaged accounts, Canada
TFSA, RRSP, FHSA and RESP: the 2026 limits
Canada's registered accounts for 2026: $7,000 of new TFSA room ($109,000 since 2009), an RRSP limit of $33,810, $8,000 a year in an FHSA, and the 20% RESP grant, with a simple order for using them.
9 min read · Updated October 2026
See where your own money goes
Drop a statement and Don finds fees, forgotten subscriptions, and overspending. Free, no bank login.
Find my money →