IRS lifts the 2027 401(k) limit to $25,500 and the SIMPLE IRA limit to $17,500

The Internal Revenue Service said Thursday that the most an employee can put into a 401(k) in 2027 is $25,500, up from $24,500 this year. In the same release (IR-2026-136) it published Notice 2026-66, which lists every retirement-plan cost-of-living adjustment for 2027. For a business owner, the headline is the 401(k) number. The one that matters more to many small employers is further down: the SIMPLE IRA limit rises from $17,000 to $17,500.

The 2027 limits, side by side

The IRS says participants aged 50 and over in most 401(k) plans can generally defer up to $34,000 in 2027 ($25,500 plus $8,500). By our arithmetic, someone aged 60 to 63 can defer up to $37,250 ($25,500 plus $11,750). SIMPLE catch-ups did not move: $4,000 for most plans, $3,850 for certain applicable plans and $5,250 for ages 60 to 63.

The number behind the number

The 401(k) increase is $1,000, or about 4.1% on $24,500. The SIMPLE increase is $500, about 2.9%. The 50-plus catch-up rises 6.25%, from $8,000 to $8,500. Spread over 26 biweekly paychecks, a worker who wants to max out defers about $980.77 a paycheck in 2027 against $942.31 in 2026, a difference of $38.46 a check. For a payroll clerk, that is a change to update in January, not a budget event.

Most of the cost of a plan to the employer does not move at all. If a company matches 3% of pay, a $60,000 employee still earns a $1,800 match in 2027 whatever the cap is. The cap only bites for employees who defer more than the old limit, which is mostly owners and a few highly paid staff.

Who it actually hits

The owner of a one-person or family business. A solo owner with a 401(k) can defer $1,000 more in 2027. Under a hypothetical 24% marginal tax rate (an assumption for illustration, not an IRS figure), that is about $240 of income tax deferred on the extra $1,000, assuming pre-tax contributions. Your accountant should confirm your actual bracket and which plan type you hold.

A shop with a SIMPLE IRA. Take a landscaping or auto repair business where a handful of employees contribute through a SIMPLE plan. The employee ceiling goes to $17,500, or $1,458.33 a month. Most hourly employees defer far less than that, so for them nothing changes; the owner and one or two senior staff are the ones who can use the room. We list 224,738 independent auto repair shops on file, and see our auto repair playbook for how those owners run their costs.

A restaurant or retail owner with older staff. The higher catch-up for ages 60 to 63 ($11,750) matters to a long-serving manager or chef who is close to retirement and wants to defer more. Whether a plan offers catch-ups at all is up to the plan document, so ask the plan provider before telling an employee they can use it.

The IRA and income-limit changes

The IRA limit stays at $7,500, and the IRA catch-up for people aged 50 and over stays at $1,100. The IRS raised the income ranges that decide who can deduct traditional IRA contributions or contribute to a Roth IRA. For singles covered by a workplace plan, the deduction phase-out for 2027 runs from $83,000 to $93,000, up from $81,000 to $91,000. The Roth IRA phase-out for singles and heads of household is $158,000 to $173,000, up from $153,000 to $168,000, and for joint filers it is $250,000 to $260,000, up from $242,000 to $252,000.

What to do

• Do nothing before January. These limits apply to 2027 contributions, and 2026 deferrals still follow this year's caps.
• Ask your payroll provider whether it updates the limit automatically or needs a setting changed. A payroll system that keeps the old cap will stop a high earner's deferral early.
• If you have employees aged 60 to 63, check the plan document for the higher catch-up before telling them about it.
• If you do not offer a plan, this release changes nothing about whether you must. See the small-business section for our related coverage on costs and payroll.

Sources: IRS news release IR-2026-136, Nov. 12, 2026, and IRS Notice 2026-66 as cited in that release; independent business counts from the Chronicle's own listings database. The marginal tax rate used is an illustrative assumption. This is general information, not tax or investment advice; ask your accountant about your plan.