Military Finances 101: 2026 by the Tax Numbers
Taxes Managing Your FinancesBy Tyler West
It’s that time of year. The IRS is publishing updates that may or may not be important to you. However, it can be overwhelming to digest the large spreadsheets of acronyms and numbers and understand how they impact you. We will cover the important changes for 2026 that you need to know, based on your current stage in your financial journey.
Early career
Early in your career, you are often working for an employer, and while you may earn a respectable salary, you are likely in a lower tax bracket than you will be later. We will talk tax strategy, but at this stage, the most important thing you can do is save. It is important for you to understand the contribution limits for 2026.
401(k)/403(b)/TSP – It is likely that your employer will offer one of these types of plans. Contribution limits to these accounts have increased by $1,000, from $23,500 to $24,500.
SIMPLE Plans – Your employer may offer a SIMPLE IRA or 401(k). An important thing to know early is that employer matches to these plans are automatically vested. Contribution limits to these accounts have increased by $500, from $16,500 to $17,000.
HSA – While these accounts won’t help Active and Retired Servicemembers, they may make sense for your children if they are young and healthy, if they select a high-deductible health plan to pay lower premiums. These plans give participants the opportunity to save in Health Savings Accounts. These are powerful accounts that give you a tax deduction up front, allow investments to grow tax-free, and may be withdrawn tax-free to pay for qualifying health expenses anytime in your or your family's future. Contribution limits to these accounts have increased by $100, from $4,300 to $4,400 for single filers, and by $200, from $8,550 to $8,750 for joint filers.
Healthcare FSA – Flexible Spending Accounts are useful for reducing not only income tax but also Social Security and Medicare taxes. These accounts are filled from your paycheck, and qualifying medical expenses can be paid from them. Contribution limits to these accounts have increased by $100, from $3,300 to $3,400. These accounts are available to Active Duty servicemembers.
IRA – Individual Retirement Accounts (IRAs) are among the best tools to get familiar with early. Contributions you make to these accounts are fully tax-deductible if your Adjusted Gross Income (AGI) is less than $81,000 as a single filer, or $129,000 filing jointly. You can also make full contributions to a Roth IRA if your AGI is less than $153,000 as a single filer or $242,000 as a joint filer. Contribution limits to these accounts have increased by $500, from $7,000 to $7,500. This limit is applied to all your IRAs, so, as an example, you can make contributions of $3,750 to both a Traditional IRA and Roth IRA, but your total contributions for all IRAs cannot exceed $7,500.
Roth – This is an account type. These accounts take contributions post-tax, meaning you don’t get a tax deduction now, but you will not pay taxes on qualified withdrawals later. You may be able to make your contributions in your 401(k) or 403(b) as a Roth, which are not subject to the income limits that Roth IRAs are subject to. Using Roth accounts early in your career can be valuable because you are paying the tax bill on your retirement money now, when you are still in a lower tax bracket. As you advance in your career and your income increases, it may be better to move away from Roth contributions so you can use tax deductions in your higher tax bracket.
Mid-career & Business owners
Arguably, the most crucial time in your financial life. Mid-career professionals are often at the peak of their income potential, juggling the responsibilities of aging parents and children, as well as decisions around starting their own business.
At this point, you are likely familiar with contribution limits, as hopefully you have been saving diligently for decades. But if you did not save as much as you would have liked or anticipate different retirement expenses than you originally planned, you should get familiar with catch-up limits.
401(k)/403(B)/TSP – If you are 50 years of age or older, you can make an extra contribution above the $24,500 limit. Catch-up Contribution limits for these accounts have increased by $500, from $7,500 to $8,000.
Roth Only – New “Roth only” rules apply to catch-up contributions. If you made above a certain cap in the prior year from your current employer, you must make all your catch-up contributions as Roth contributions. The cap for 2026 is $150,000 of wages, an increase of $5,000 from the $145,000 cap in 2025.
IRA - If you are 50 years of age or older, you can make an extra contribution above the $7,500 limit. Catch-up Contribution limits for these accounts have increased by $100, from $1,000 to $1,100. This limit applies to all IRAs, Traditional and Roth.
457(b) – In your peak income-earning years, you may qualify for a type of deferred compensation plan called a 457(b). We will not get into the specifics, but these plans can be powerful tools to boost your retirement savings, especially when you have extra disposable income. Contribution limits to these accounts have increased by $1,000, from $23,500 to $24,500.
SEP – The Simplified Employee Pension (SEP) is a widely used retirement savings account for self-employed and small business owners. The power of the SEP lies in the drastically higher contribution limits for owners compared to those in plans you may have access to as an employee. SEPs are limited to contributions of 25% of earnings. For 2026, the maximum earnings to calculate your contribution limit are $360,000, a $10,000 increase from $350,000 in 2025. There is also a dollar cap, which has increased $2,000 from $70,000 to $72,000 in 2026.
End of Career & Early Retirement
An exciting and often stressful time is that period at the end of our careers and the beginning of retirement. During this period, we are attempting to define a new standard of living, new cash flow, and new insurance, and make sure that everything fits together properly.
At this time, there are some unique numbers that only pertain to you that you should get familiar with, including special catch-up limits, as well as Social Security and Medicare benefits.
401(k) – If you are between the ages of 60 and 63, you can make an extra contribution above the $24,500 limit, similar to the catch-up for ages 50 or older, but this catch-up is higher, often called the “super catch-up”. The higher Catch-up Contribution limits to these accounts have not changed, remaining at $11,250.
Social Security – Every year, your Social Security benefits will receive a cost-of-living adjustment (COLA). You will receive a notification of changes to your benefit in early December each year, with the changes taking effect in January. For 2026, the COLA has been set at 2.8% (military pensions and VA disability compensation will increase by the same amount). This reflects an added benefit of $56 per month for the average Social Security beneficiary receiving $2,008 per month.
Medicare – Premiums for Medicare change. And while you may be impacted by additional charges based on your income, there is a base premium for all Medicare participants. In 2026, Medicare Part B premiums will increase $17.90 to $202.90.
In summary, there are many numbers and acronyms out there. Do you need to know them all? No. But you should be generally familiar with the accounts you use, the limits that apply to them, and understand that the various numbers you need to know are subject to change annually.
Military Finances are Different
Just like what you wear to work is different than what a civilian wears to work, your finances are different than a civilian's finances. You have unique benefits and opportunities not available to your civilian counterpart. That's why we think you should work with an financial advisor or planner that deals with these issues every day. If you'd like to find out how we work with clients just like you, use the button below to schedule a free, initial consultation.
If you found this article useful, you might like the following blog posts:
Retired Military Finances 301: New "Catch-up" Rules Go into Effect in 2026
Retired Military Finances 301: I Inherited Mom's (or Dad's) IRA. How do I Minimize my Tax Bill?
Retired Military Finances 201: Doing the 529 TwoStep