Retirement planning: 401(k) limits and cash balance pensions

Retirement planning strategies are shifting as workers evaluate contribution limits and new pension models. For 2026, the Internal Revenue Service has increased the basic 401(k) employee contribution limit to $24,500, up from $23,500 in 2025. Workers aged 50 and older remain eligible for catch-up contributions, with those between 60 and 63 potentially qualifying for an additional $11,250.

Simultaneously, some large companies are reintroducing elements of traditional pensions by utilizing cash balance plans alongside existing defined contribution plans. These cash balance plans credit investment growth to individual accounts based on portfolio performance, often starting with a guaranteed minimum annual return. This structure aims to protect workers from market volatility during their final years of employment while allowing for potential appreciation and better annuity payout rates upon retirement.