2026 V1 Article - Wealth Management

When preparing for retirement, it helps to understand both where your future income might come from and how much you’re able to save along the way. People who are still working often expect a wider mix of income sources than retirees ultimately experience, making it especially important to have a clear picture of the tools available to support long-term financial security. 

Read on for an overview of the six primary income sources, along with the newly released 2026 contribution limits that may affect your savings strategy in the year ahead.

• Social Security 
  Social Security is the foundation of retirement income for many Americans. After at least 10 years of paying Social Security taxes, workers qualify for benefits based on their 35 highest-earning years. For 2026, the estimated average monthly benefit is $2,071.¹ While Social Security typically forms the baseline of retirement income, most people will need additional sources to maintain their preferred lifestyle.

• Personal Savings and Investments 
  Savings and investments held outside of retirement accounts—such as brokerage portfolios, CDs, or annuities—can help supplement income as needed. Many retirees seek investments that provide a predictable monthly income. These accounts are not subject to IRS contribution limits, and they often play a critical role when other retirement sources are insufficient.

• Continued Employment
  Working during retirement can help supplement income — but expectations don’t always match reality. While 73% of workers say they plan to work for pay in retirement, only 25% of retirees report actually relying on employment as a meaningful source of income.³ Health, caregiving responsibilities, lifestyle changes, or limited job opportunities often influence whether working in retirement becomes part of an individual’s income mix.

Individual Retirement Accounts (IRAs) 
IRAs remain among the most common retirement savings tools, and the IRS has announced new contribution limits for 2026. 

Traditional IRAs 
Withdrawals from Traditional IRAs are taxed as ordinary income. Early withdrawals (before age 59½) may incur a 10% federal tax penalty, and in most cases required minimum distributions (RMDs) must begin by age 73.

• For 2026: 
  Contribution limits are up $500 to $7,500
  Catch-up contributions for those over age 50 are up $100 to $1,100, bringing the total limit to $8,600.

Roth IRAs
Roth IRAs allow tax-free withdrawals in retirement if the account has been open for at least five years and the owner is at least 59½. Roth IRAs do not require RMDs, providing flexibility in managing retirement income.

• For 2026, income phase-out thresholds increase to: 
  $153,000–$168,000 for single filers
  $242,000–$252,000 for married couples filing jointly
  Married individuals filing separately retain a phase-out range of $0–$10,000.

Defined Contribution Plans & SIMPLE Accounts
Employer-sponsored plans such as 401(k), 403(b), 457—and SIMPLE accounts—continue to be among the most popular savings vehicles for many workers. This year brings higher contribution limits across these plans. 

401(k), 403(b), and 457 Plans 

As with IRAs, withdrawals are taxed as ordinary income, early withdrawals may face penalties, and RMDs generally begin at age 73.

• 2026 employee contribution limit increases $1,000 to $24,500
• Catch-up contributions for age 50+ remain at $8,000 (total: $32,500)
• Workers aged 60–63 may qualify for an enhanced catch-up of $11,250, bringing their total contribution to $35,750

SIMPLE Accounts 

Like Traditional IRAs, SIMPLE account withdrawals are: taxed as ordinary income; early ones may trigger a 10% federal penalty, and RMDs generally begin at age 73.

• 2026 contribution limit increases $500 to $17,000
• Certain plans under SECURE Act 2.0 may allow a higher limit of $18,100

Defined Benefit Plans
Traditional pension plans pay a guaranteed monthly benefit, typically determined by salary history and years of employment. While fewer employers offer pensions today compared to decades past, they remain a reliable source of retirement income for those who still have access to them.²
 

By understanding both potential income sources and the updated 2026 contribution limits, you can make informed decisions to help build a more confident and sustainable retirement plan. Because these rules affect taxes, withdrawals, and long-term growth potential, consider consulting a qualified tax or financial professional—or one of our Wealth Advisors at UMassFive Wealth Management—before adjusting your strategy.

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¹SSA.gov, 2025. ²EBRI.org, 2024. ³Investopedia.com, December August 16, 2025.

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