Retirement completely changes the way you pay taxes on income, and evolving tax laws can have a significant impact on retirement accounts. Staying informed of those changes is the best way to stretch your retirement dollars. The permanent extension of the 2017 Tax Cuts and Jobs Act, through the One Big Beautiful Bill Act signed in July 2025, along with the ongoing provisions of the SECURE Act 2.0, has the most significant impact on how retirement income will be taxed. This post outlines the tax law changes most likely to affect retirees in 2026.
Take Required Minimum Distributions (RMDs) Later
The SECURE Act 2.0 includes several provisions related to required minimum distributions (RMDs) from IRA and 401(k) accounts. Previously, retirees were required to start taking RMDs at age 72. However, the age increased to 73 in 2023, giving retirees an extra year before withdrawals become mandatory.
The penalties for failing to take mandatory withdrawals also dropped in 2023, from 50% to 25%. Those penalties can be further reduced to 10% by withdrawing the previously untaken RMD amount and filing a corrected tax return on time.
The required withdrawal amount can be reduced by applying in-plan annuity payments that exceed the RMD amount. Roth accounts in employer plans have been exempt from mandatory withdrawals since 2024.
Key Takeaways:
- The RMD age is currently 73 for those born between 1951-1959, increasing to 75 in 2033 for those born in 1960 or later.
- RMD penalties are 25%, or 10% if corrected with a timely tax return.
- Roth accounts in employer plans remain exempt from RMDs.
Increase Catch-up Contributions
To set aside more earnings for retirement, people aged 50 and older can make additional contributions to 401(k) accounts and IRAs through catch-up contributions. The SECURE Act 2.0 introduced special provisions to encourage these contributions as individuals approach retirement. As of 2025, those aged 60 to 63 can make catch-up contributions of up to $10,000 per year to a workplace plan, an increase from the $7,500 available to those aged 50 to 69. The IRS hasn’t released the official limits for 2026 as of November 2025, though they are expected to increase slightly.
Significant changes will be introduced to the way catch-up contributions can be made for high earners. Beginning in 2026, employees aged 50+ who earn over $145,000 must allocate all catch-up contributions to Roth (after-tax) accounts. Employers must update their payroll and retirement plan systems to comply with this rule. Individuals earning under that amount are exempt and can still make contributions through pre-tax dollars.
Key Takeaways:
- People aged 60 to 63 can contribute enhanced catch-up amounts to workplace retirement plans.
- IRA catch-up limits continue adjusting for inflation.
- Starting in 2026, individuals with earnings exceeding $145,000 must make catch-up contributions to Roth accounts using after-tax dollars.
Raise Deferred Income Annuities
Qualified longevity annuity contracts (QLACs) are deferred income annuities purchased with retirement funds that begin payments on or before age 85. Converting funds in a qualified retirement plan to an annuity allows retirees to set aside funds that are exempt from RMD rules until they reach 85 years old.
Before 2023, the limit for these premiums was $145,000. As of 2025, individuals can contribute up to $210,000 to a QLAC. This dollar limit is indexed for inflation each year, including 2026 and beyond, with the exact amount announced annually by the IRS.
Key Takeaways:
- QLACs provide guaranteed income by age 85 and are exempt from RMD rules until then.
- Premium limits increased to $210,000 in 2026, with the 25% account balance cap remaining eliminated.
- Retirees can continue to defer RMDs and taxes with these rules.
Increase in the Standard Tax Deduction
Most taxpayers opt to take the standard annual deduction rather than itemize their tax returns. The standard deduction for all taxpayers in the 2026 filing season is:
- Married filing jointly: $32,200 (up from $31,500 in 2025)
- Single or married filing separately: $16,100 (up from $15,700 in 2025)
- Head of household: $24,150 (up from $23,850 in 2025)
Individuals aged 65 and older are eligible for a higher standard deduction. The additional deduction in 2026 is $2,050 for single filers and heads of household. Married filers receive an additional $1,650 if they have a qualifying spouse aged 65 or older.
Tax Cuts and Jobs Act (TCJA) Rates Now Permanent
The 2017 Tax Cuts and Jobs Act introduced significant changes to the tax code. These were initially scheduled to expire on December 31, 2025, which would have meant tax increases for most Americans in 2026. However, the One Big Beautiful Bill Act permanently extended many of these provisions.
For retirees, this provides some certainty for long-term financial planning. Those who hold substantial assets in a traditional IRA may now convert them to a Roth IRA with some relief from future tax increases. Keep in mind that Roth IRA conversions are irreversible, so it’s essential to consult with a financial advisor about the pros and cons of these conversions.
Key Takeaways:
- The 2017 Tax Cuts and Jobs Act rates are now permanent, eliminating the December 31, 2025 sunset.
- Converting traditional IRA assets to a Roth IRA now locks in tax rates, but taxes are due upon conversion.
- Roth conversions are irreversible; consult a financial advisor before proceeding.
FAQ: Retirement Tax Changes for 2026
1. What are the biggest retirement tax changes coming in 2026?
The most impactful changes involve Required Minimum Distributions (RMDs), expanded catch-up contributions, mandatory Roth catch-ups for high earners, higher QLAC limits, and updated standard deductions.
2. Is the RMD age increasing again in 2026?
No. In 2026, the current RMD age remains 73 for people born between 1951 and 1959.
3. What are the penalties for missing an RMD in 2026?
The penalty remains 25% of the amount not withdrawn, reduced to 10% if you correct the mistake and file an amended tax return on time.
4. How do catch-up contribution rules change for high earners in 2026?
Beginning in 2026, individuals aged 50+ who earn over $145,000 must make all catch-up contributions into a Roth (after-tax) account.
5. What are the catch-up contribution limits for ages 60–63 in 2026?
Enhanced catch-ups allow people aged 60–63 to contribute up to $10,000 (indexed for inflation) to workplace retirement plans.
6. What is the new QLAC limit for 2026?
The maximum premium allowed is $210,000, indexed for inflation. The prior 25% account balance cap remains eliminated.
7. How does a QLAC help lower taxes in retirement?
QLAC funds are excluded from RMD calculations until payments begin—no later than age 85—allowing retirees to defer taxable income.
8. What will the standard deduction be for retirees in 2026?
The 2026 standard deduction is:
- $32,200 for married filing jointly
- $16,100 for single filers
- $24,150 for head of household
Retirees 65+ get an additional $2,050 (single) or $1,650 per qualifying spouse (married).
9. Is 2026 a good time to do a Roth conversion?
Possibly. With TCJA tax rates now permanent, converting at today’s lower rates may be advantageous, but consult a financial advisor because conversions are irreversible.
10. Should I change my retirement withdrawal strategy before 2026?
Many retirees may benefit from revisiting their withdrawal strategy, especially regarding:
- Roth conversions
- Timing RMDs
- Using QLACs
- Shifting pretax vs. after-tax contributions
Consult with a financial professional to help optimize your plan under the 2026 rules.
55places Can Help You Find a Home Within Your Retirement Budget
Retirement isn’t static, and keeping up with tax changes can help retirees increase their budget and spend more appropriately. Staying on top of the changes that happen each year will help you maximize your financial planning and make the most out of your retirement. To stretch your retirement budget as far as possible while maintaining the lifestyle you want, careful planning is essential. Part of this is finding an affordable retirement location.
If you’re seeking the ideal 55+ community to help you achieve your retirement dreams, the experts at 55places can help. We invite you to browse our website or contact us today to learn more about our services.
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