Fidelity sounds alarm on 401(k)s, IRAs

Millions of Americans who are saving and investing for retirement are actively searching for ways to maximize their money.

It’s been my experience, reporting for years on how people engage in this exercise, that those who prioritize 401(k) plans and Individual Retirement Accounts (IRAs) are looking to find a path to advance their financial interest in order to live the lifestyle they imagine for their post-career dreams.

Financial services company Fidelity Investments warns Americans on some key requirements that people planning for retirement should know, particularly with regard to account withdrawals.

“Traditional IRAs and pre-tax 401(k)s force you to start withdrawing from your account — whether you need the funds or not — once you reach 73 (age 75 starting in 2033),” Fidelity wrote.

“Those who are still working for the company sponsoring their 401(k) may be able to delay these withdrawals from the 401(k) until they’ve stopped working, with one exception: If you own 5% or more of the company, you’ll be required to take RMDs as scheduled at the designated age.”

Required Minimum Distributions (RMDs) are the minimum amounts one must withdraw from their retirement accounts each year.

There are a couple points to consider.

“You can withdraw more than the minimum required amount,” the Internal Revenue Service (IRS) explains. “Your withdrawals are included in taxable income except for any part that was already taxed (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).”

Fidelity explains 401(k), IRA differences

401(k)s and IRAs are both tax‑advantaged retirement accounts, but they differ in how one accesses them, how much a person can contribute, and the level of control one has over investments.

A 401(k) is only available through an employer and typically allows much higher contributions, often with matching funds that can significantly boost savings, though investment options are limited to the plan’s menu.

An IRA is an individual account that anyone with earned income can open, offering broad investment choices but lower annual contribution limits and no employer match.

More on personal finance:

Zillow forecasts big mortgage change for U.S. housing marketAARP sounds alarm on major Social Security problemDave Ramsey bluntly warns Americans on 401(k)s

Both come in traditional and Roth versions, both provide tax benefits, and both are designed for long‑term retirement savings, but IRAs offer more flexibility for certain penalty‑free withdrawals while 401(k)s are more restrictive.

“Keep in mind that contributions across all of your traditional and Roth IRAs are aggregated, and the same can be said for contributions across all of your traditional or Roth designated 401(k),” Fidelity wrote.

“For example, if you have 2 traditional IRAs and 1 Roth IRA, the maximum you can contribute to all 3 of them in 2026 is $7,500 if you’re under 50. In other words, your contribution limit applies across all IRAs as opposed to having a limit per account.”

401(k) contribution limits in 2026The standard 401(k) contribution limit has risen to $24,500 in 2026, a $1,000 increase from 2025.Individuals ages 50 to 59 or 64 and older may add an $8,000 catch‑up contribution in 2026, raising their total allowable 401(k) contribution to $32,500.Workers ages 60 to 63 may contribute an $11,250 catch‑up amount in 2026, bringing their total possible 401(k) contribution to $35,750, if their plan permits this enhanced limit.
(Source: Fidelity Investments)
IRA contribution limits in 2026The IRA contribution limit has increased to $7,500 in 2026 for individuals under age 50.The IRA catch‑up limit for those 50 or older rises to $8,600 in 2026, setting their total allowable IRA contribution at $8,600 for the year.
(Source: Fidelity Investments)

Fidelity raises awareness about key retirement account factors.

Shutterstock

Fidelity focuses on Roth IRA income limits

“How much you earn each year may dictate how much you can contribute to a Roth IRA or how much of your traditional IRA contributions you can deduct from your taxable income each year,” Fidelity wrote.

The income cap for making a full Roth IRA contribution in 2026 is below $153,000 for single filers and below $242,000 for married couples filing jointly.A single filer with Modified Adjusted Gross Income (MAGI) between $153,000 and $168,000 in 2026 may contribute a reduced amount to a Roth IRA.Married couples filing jointly with MAGI between $242,000 and $252,000 in 2026 may also contribute a partial amount.Single filers with MAGI of $168,000 or more in 2026 are not eligible to contribute to a Roth IRA.Joint filers with MAGI of $252,000 or more in 2026 are likewise ineligible to contribute to a Roth IRA.Individuals who exceed the Roth IRA income limits in 2026 may still contribute to a traditional IRA, regardless of income.
(Source: Fidelity Investments)

Related: AARP warns Americans on major Social Security problem

#Fidelity #sounds #alarm #401ks #IRAs