With 2025 behind us, now is a good time to ask whether your retirement planning in Pennsylvania reflects the most recent changes.

Federal tax rules continue to evolve, SECURE 2.0 provisions are still phasing in, and inflation adjustments affect nearly every major retirement strategy. If key updates are overlooked, you may miss opportunities or feel pressured into less-than-ideal decisions as important planning windows begin to narrow.

As experienced retirement planning specialists in Central Pennsylvania, 1st Choice Financial Services, Inc., an independent advisor firm headquartered in Camp Hill, provides comprehensive financial solutions to clients in Harrisburg, Hershey, Halifax, Lancaster, Lebanon, Enola, Mechanicsburg, and surrounding communities.

This article covers key topics for 2026 planning, including updated retirement contribution limits, catch-up provisions for those over 50, and tax-efficient ideas that may help you coordinate income decisions throughout retirement.

Federal Changes To Address After January 1st (Retirement Contributions & Tax Planning)

The 2026 Federal retirement rules bring several considerations that may affect high earners, pre-retirees, and those already drawing income. Effective wealth management in Central Pennsylvania and beyond begins with understanding how these federal changes apply to your plan.

Maximize Your Retirement Savings Limits

The IRS adjusts retirement plan limits annually for inflation. For 2026, the key contribution limits are:

• 401(k), 403(b), and 457 elective deferral limit: $24,500
• Traditional and Roth IRA contribution limit: $7,500

For individuals age 50 and older:

• Employer-sponsored plan catch-up contribution: $8,000
• IRA catch-up contribution: $1,100, bringing the total IRA contribution potential to $8,600

Enhanced Catch-Up for Ages 60–63

Under SECURE 2.0, participants in employer-sponsored plans (401(k), 403(b), 457) who are ages 60, 61, 62, or 63 during 2026 may be eligible for an increased catch-up amount:

• Enhanced Catch-up Contribution (Ages 60-63): $11,250
• Total Employee Deferral Potential (Ages 60-63): $35,750 ($24,500 + $11,250)

For individuals who are self-employed or own small businesses, contribution rules allow for significantly higher totals:

• SEP IRA: Contributions may be made solely by the business and are generally based on eligible compensation, capped at $72,000 for 2026

• Solo 401(k): Allows both:
  • Employee deferrals up to $24,500 (plus applicable catch-up amounts), and
  • Employer contributions based on net business income

Combined contributions are subject to the same $72,000 annual cap for 2026, excluding catch-up contributions. This means the total maximum contribution, including the standard age 50+ catch-up, is $80,000. For the 60-63 age group, the maximum is $83,250. Because contribution formulas for self-employment plans depend on compensation and business income, totals can vary from year to year.

If your specific plan allows, you can increase your contribution rate now to maximize tax-advantaged growth before retirement.

Navigating New Roth Catch-Up Contribution Rules

Under SECURE 2.0, individuals age 50 and older with prior-year FICA wages (Box 3 of W-2) exceeding $150,000 must make any catch-up contributions to their employer-sponsored plan (401(k), 403(b), 457) on a Roth (after-tax) basis beginning in 2026.

Note: This Roth mandate does not apply to catch-up contributions made to IRAs or to self-employed individuals (who typically do not have FICA wages from their own plan).

You may be able to avoid penalties and manage your tax bracket more effectively by understanding how these Roth rules apply to your income.

The New Tax Deductions for Central PA Seniors (Age 65+)

For 2026, standard deduction amounts remain inflation-adjusted, with additional deductions available for taxpayers age 65 and older. Additionally, a new temporary senior-specific deduction of $6,000 (or $12,000 for couples if both are 65+) is available for those who meet certain income limits (generally phasing out for single filers above $75,000 MAGI and couples above $150,000 MAGI).

Coordinating withdrawals alongside higher deductions may reduce taxable income.

Leveraging Pennsylvania’s Retirement Tax-Friendliness

One of the major benefits of retirement planning in Pennsylvania is the state’s favorable treatment of retirement income. Understanding how this interacts with federal taxes is vital.

Capitalizing on PA’s Income Exemptions

Pennsylvania does not tax:

• Social Security benefits
• Qualified pension income (generally exempt for those retired after meeting age or service requirements)
• Withdrawals from IRAs, 401(k)s, and similar retirement accounts (exempt if the distribution is taken after meeting the plan’s requirements for retirement, typically age 59½ or older)

If your plan allows for diversified income sources, this exemption becomes crucial when coordinating federal taxes, as Pennsylvania’s flat 3.07% income tax rate applies to wages and other non-exempt income.

Proactive Wealth Planning Across Central Pennsylvania Communities

Because Pennsylvania does not tax retirement income, planning often focuses on federal tax efficiency and on managing local costs, such as property taxes. 1st Choice retirement specialist for Central Pennsylvania understands how expenses vary between communities like Hershey, Lancaster, and Mechanicsburg when calculating retirement income needs.

Optimize Your Social Security and Medicare Strategy

Social Security and Medicare decisions often set the foundation for retirement income and healthcare planning.

Understanding Social Security Cost-of-Living Adjustments (COLA)

Social Security benefits include an annual cost-of-living adjustment (COLA) to help offset inflation. For 2026, the Social Security Administration has announced a 2.8% increase.

Depending on factors like your health, current employment status, and how you coordinate different income streams, you may be able to increase your lifetime benefits by delaying when you start to claim them.

Medicare Enrollment and Coverage Gaps

Medicare enrollment begins during the Initial Enrollment Period around age 65. Missing deadlines or overlooking coverage gaps may lead to higher premiums later.

A 1st Choice retirement specialist in Central Pennsylvania can help you review your Social Security and healthcare coverage options. We can also help you avoid unnecessary penalties by coordinating healthcare costs with your broader retirement budget.

Connect With a Local Independent Retirement Specialist

Preparing for 2026 involves knowing several federal tax rules, Pennsylvania’s retirement income exemptions, and how Social Security and Medicare decisions affect your future. Addressing these areas early gives you more flexibility as you approach retirement.

The 1st Choice team proudly serves individuals and families across Camp Hill and the surrounding communities, offering guidance designed to reflect your goals and circumstances.

If you’re ready to review your 2026 planning outlook, consider scheduling a complimentary retirement readiness review with us today.

Investment advisory services offered through Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser. The views, statements and opinions expressed herein are those of 1st Choice Financial, and not necessarily of Foundations or their affiliates. The content provided is for educational purposes only and the views reflected are subject to change at any time without notice. No investment, legal or tax advice is provided. Always consult with a professional. Foundations deems reliable any statistical data or information obtained from third party sources that is included in this article,  but in no way guarantees its accuracy or completeness.