This is the final post in a three-part year-end tax series. Part 1 covered tax-loss harvesting. Part 2 covered charitable giving.
Retirement contributions cut your taxes now and build wealth for decades. Few year-end moves do both.
They are also easy to run out of time on. Most of your contributions come through payroll, and you are down to roughly twelve weeks.
The 2026 Limits
• 401(k), 403(b), most 457 plans: $24,500 in employee deferrals
• Catch-up, age 50 and older: an extra $8,000, for $32,500 total
• Super catch-up, ages 60 to 63: an extra $11,250, for $35,750 total
• IRA: $7,500, plus a $1,100 catch-up if you are 50 or older
• Total 401(k) additions, employer money included: $72,000
A New Rule for Higher Earners
Starting in 2026, if your prior-year FICA wages with your employer topped $150,000, your catch-up contributions must go into a Roth account.
That means no upfront deduction on the catch-up amount. The money grows tax free, and qualified withdrawals come out tax free.
Confirm your plan offers a Roth option. Ask your plan administrator now, not in December.
Check Where You Stand
Log in and look at your year-to-date deferrals. Then do the math on your remaining paychecks.
If you want to hit the limit, raise your contribution percentage now. Fewer pay periods are left to spread it across.
Also confirm you are getting your full employer match. It is the closest thing to a guaranteed return you will find.
Already Maxed Out Your Work Plan?
Good. You still have room.
Start with a Roth IRA. You can put in up to $7,500, or $8,600 if you are 50 or older. That limit covers all of your IRAs combined, and your income has to fall under the Roth limits in the next section.
If you are over those limits or want to save more, a taxable brokerage account has no contribution cap and no income limit. You don't get an upfront deduction, but long-term gains get favorable rates, and it pairs well with the harvesting strategies in Part 1.
Look at Your IRA
You can make 2026 IRA contributions until the tax filing deadline in April 2027. You don't need to wait. Money invested earlier has more time to grow.
Married, and only one of you works? The other spouse can still fund an IRA. It's called a spousal IRA.
You have to file a joint return. The account goes in the non-working spouse's name, and the working spouse's income supports the contribution. Each of you can put in up to $7,500, or $8,600 if you are 50 or older. Together, your contributions can't exceed the couple's taxable compensation for the year.
For a couple with enough income, that is $15,000 a year, or $17,200 if you are both 50 or older, on one paycheck. Roth rules still apply, so your joint income has to fall under the Roth limits below.
Roth IRA contributions phase out between $153,000 and $168,000 of income for single filers, and between $242,000 and $252,000 for joint filers. Above those ranges, the backdoor Roth is the workaround. It needs care if you hold other pre-tax IRA balances, so run it past your advisor and CPA first.
Don't Overlook the HSA
If you have a high-deductible health plan, an HSA is one of the best accounts available. Contributions go in tax free, growth is tax free, and withdrawals for qualified medical expenses come out tax free.
The 2026 limits are $4,400 for self-only coverage and $8,750 for family coverage. If you are 55 or older, you can add $1,000. Employer contributions count toward the limit.
Your health plan has to qualify. For 2026, that means a minimum deductible of $1,700 for self-only coverage or $3,400 for family coverage.
After-Tax 401(k) Contributions
Some plans let you save beyond the $24,500 deferral limit by contributing after-tax dollars. The 2026 limit on total additions is $72,000, counting your deferrals and any employer contributions. Catch-up contributions sit on top of that.
Say you defer $24,500 and your employer adds nothing. That leaves up to $47,500 of room for after-tax contributions.
Here is the catch. Your plan has to allow it, and many don't. The plan must accept after-tax contributions and let you convert them to Roth, either inside the plan or by rolling them to a Roth IRA. Plan design decides whether this is available to you. Check with your plan administrator and your CPA before you contribute.
If your plan allows it, convert the after-tax money as often as the plan lets you. Earnings that build up before the conversion are taxable, so a quick conversion keeps that number small.
Consider a Roth Conversion
A conversion moves money from a pre-tax account into a Roth. You pay tax on the converted amount this year. After that, growth and qualified withdrawals are tax free. You have to finish it by December 31.
It works best in a year when your income is lower than usual, or when you want to shrink future required minimum distributions.
Two things to weigh.
- A conversion raises your 2026 income, which pushes on your tax bracket this year.
- Your 2026 income also sets your Medicare premiums in 2028. For 2026, the surcharges start at $109,000 for single filers and $218,000 for joint filers, based on income from two years earlier.
A good conversion plan converts up to a threshold, not through it.
Take Your RMD
If you are subject to required minimum distributions, take yours before December 31. Miss it and you owe a penalty.
If you plan to give to charity, go back to Part 2. A QCD can cover some or all of your RMD without adding to your taxable income.
Business Owners
Look at your options now.
- SEP IRA: simple to set up and fund
- Solo 401(k): takes both employee deferrals and employer contributions
- Cash balance or defined benefit plan: supports much larger deductible contributions, with more planning and administration
Some plans must be in place by year-end even if you fund them later. Talk with your advisor and CPA in October or November, not after the holidays.
Your Checklist
- Check year-to-date deferrals and project your final total
- Adjust your payroll contribution rate if needed
- Confirm your plan offers a Roth option
- Review your IRA contribution and Roth eligibility
- Married with one earner? Fund a spousal IRA for the other spouse
- Check HSA eligibility and year-to-date contributions
- Ask your plan administrator whether after-tax contributions and Roth conversions are allowed
- Model a Roth conversion against your tax bracket and Medicare thresholds
- Take your RMD if you owe one
- Business owners: set up your plan before December 31
Putting the Series Together
These three strategies work best as one plan.
Harvested losses can make room for a Roth conversion. A QCD can cover your RMD and support a cause you care about. Retirement contributions lower the income that drives everything else.
Frank
McKinley Carter Wealth Services
This content is for educational purposes and is not tax or legal advice. Please consult your tax professional about your individual situation.