One Big Beautiful Bill Act Brings Major Changes to Retirement Savings in 2026
The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced several significant changes to retirement savings and tax planning that took effect in 2026. Key provisions include higher 401(k) catch-up contribution limits, new Trump Accounts for children, a Senior Bonus Deduction, and an increased estate tax exemption of $15 million per person.
The One Big Beautiful Bill Act was signed into law on July 4, 2025. Several of its provisions took effect in 2026 and are changing how Americans save for retirement and plan their estates.
The standard 401(k) contribution limit for 2026 is $24,500. Savers aged 50 and older can contribute an additional $8,000. Those aged 60 to 63 may use an enhanced catch-up of $11,250 if their employer's plan allows it. High earners with prior-year FICA wages above $150,000 are now required to make catch-up contributions on an after-tax Roth basis, removing the immediate pre-tax deduction on those amounts.
Starting January 1, 2026, U.S. citizens under age 18 are eligible for Trump Accounts, which are tax-advantaged savings vehicles. The government provides a one-time $1,000 contribution for eligible children born between 2025 and 2028. Annual contributions are capped at $5,000, with employer contributions capped at $2,500. These accounts function like traditional IRAs once the beneficiary turns 18.
Taxpayers aged 65 and older can claim a Senior Bonus Deduction of $6,000, or $12,000 for married couples, for the 2025 through 2028 tax years. The deduction is available whether or not the taxpayer itemizes, though it phases out starting at $75,000 for singles and $150,000 for joint filers.
The estate tax exemption increased to $15 million per person, or $30 million for married couples, indexed for inflation.
The State and Local Tax deduction cap rose temporarily from $10,000 to $40,000 for tax years 2025 through 2029 for taxpayers with modified adjusted gross income below $500,000.
Financial advisers say the changes require a fresh look at retirement and estate plans, particularly for those in the 60-to-63 age bracket and for families with young children.
