Last year, the enactment of the One Big Beautiful Bill Act (OBBBA) preserved many key provisions of the federal tax code for individuals, including lower marginal income tax rates and a higher estate tax exemption.
However, several planning rules have changed quietly. Provisions from recent legislation – most notably the SECURE 2.0 Act – are now taking effect, with meaningful implications for tax and retirement planning. Broader dynamics, including shifts in white-collar job markets and evolving investment trends, also warrant close attention. Below are four priorities to address in 2026.
Mandatory Roth Catch-Up Contributions
As of January 1, 2026, high earners can no longer make pre-tax catch-up contributions to 401(k) plans. If you are age 50 or older and your FICA wages exceeded $145,000 last year (indexed for inflation), you must make your catch-up contributions on a Roth basis for this year.
The result is a higher taxable income from the current year due to the loss of the deduction. This can affect marginal brackets and Net Investment Income Tax (NIIT) exposure.
Review your payroll elections and connect with your tax professional to update your 2026 income tax projections. While the change increases current taxes, it also accelerates the growth of tax-free retirement assets.
Itemized Deduction Limits
Recent legislation temporarily increased the SALT deduction cap to $40,000 through 2029, restoring deductibility for many high-tax households, subject to income phaseouts.
However, beginning in 2026, taxpayers in the 37% bracket face a cap on the value of itemized deductions. Deductions effectively reduce income at a 35% rate rather than 37%. While SALT deductibility increased, the combined benefit of charitable giving and mortgage interest may be limited compared to prior years.
The standard versus itemized decision now requires more analysis. Strategies such as bunching charitable gifts or using Donor-Advised Funds may be necessary to optimize deductions.
Portfolio Concentration Risk
Equity markets posted strong gains in 2025, driven by a narrow group of large-cap technology and AI stocks. For portfolios that haven’t been rebalanced recently, risk exposure may have increased materially.
Extended periods of sector outperformance can erode diversification. A portfolio that once aligned with its target allocation may now carry significantly more equity risk than intended.
For any portfolio investments you manage personally, consider reviewing your asset allocation and rebalancing to ensure your risk remains aligned with your long-term investment objectives.
Liquidity Planning for Income Volatility
Despite overall economic resilience, employment risk for high earners has increased, particularly in technology, finance, and professional services. Portfolio growth does not eliminate the need for liquidity.
Marketable assets are not a substitute for emergency reserves. Funding living expenses through asset sales during market declines can permanently impair long-term results.
An expanded liquidity reserve – up to 18 months of expenses – for those in volatile industries is increasingly appropriate. Non-market-correlated sources such as high-yield savings, Treasury ladders, or access to a pledged asset line can provide flexibility without disrupting investment strategy.
This year, be mindful not to react to headlines, focus on connecting with your tax professional and Wealth Manager to understand how new rules may impact you. Proactive planning can materially improve outcomes over the long term. Please reach out to your Wealth Manager with questions.
Weekly Commentary
Top Financial Planning Priorities for 2026: New Rules, New Risks
Mallon FitzPatrick
Last year, the enactment of the One Big Beautiful Bill Act (OBBBA) preserved many key provisions of the federal tax code for individuals, including lower marginal income tax rates and a higher estate tax exemption.
However, several planning rules have changed quietly. Provisions from recent legislation – most notably the SECURE 2.0 Act – are now taking effect, with meaningful implications for tax and retirement planning. Broader dynamics, including shifts in white-collar job markets and evolving investment trends, also warrant close attention. Below are four priorities to address in 2026.
Mandatory Roth Catch-Up Contributions
As of January 1, 2026, high earners can no longer make pre-tax catch-up contributions to 401(k) plans. If you are age 50 or older and your FICA wages exceeded $145,000 last year (indexed for inflation), you must make your catch-up contributions on a Roth basis for this year.
The result is a higher taxable income from the current year due to the loss of the deduction. This can affect marginal brackets and Net Investment Income Tax (NIIT) exposure.
Review your payroll elections and connect with your tax professional to update your 2026 income tax projections. While the change increases current taxes, it also accelerates the growth of tax-free retirement assets.
Itemized Deduction Limits
Recent legislation temporarily increased the SALT deduction cap to $40,000 through 2029, restoring deductibility for many high-tax households, subject to income phaseouts.
However, beginning in 2026, taxpayers in the 37% bracket face a cap on the value of itemized deductions. Deductions effectively reduce income at a 35% rate rather than 37%. While SALT deductibility increased, the combined benefit of charitable giving and mortgage interest may be limited compared to prior years.
The standard versus itemized decision now requires more analysis. Strategies such as bunching charitable gifts or using Donor-Advised Funds may be necessary to optimize deductions.
Portfolio Concentration Risk
Equity markets posted strong gains in 2025, driven by a narrow group of large-cap technology and AI stocks. For portfolios that haven’t been rebalanced recently, risk exposure may have increased materially.
Extended periods of sector outperformance can erode diversification. A portfolio that once aligned with its target allocation may now carry significantly more equity risk than intended.
For any portfolio investments you manage personally, consider reviewing your asset allocation and rebalancing to ensure your risk remains aligned with your long-term investment objectives.
Liquidity Planning for Income Volatility
Despite overall economic resilience, employment risk for high earners has increased, particularly in technology, finance, and professional services. Portfolio growth does not eliminate the need for liquidity.
Marketable assets are not a substitute for emergency reserves. Funding living expenses through asset sales during market declines can permanently impair long-term results.
An expanded liquidity reserve – up to 18 months of expenses – for those in volatile industries is increasingly appropriate. Non-market-correlated sources such as high-yield savings, Treasury ladders, or access to a pledged asset line can provide flexibility without disrupting investment strategy.
This year, be mindful not to react to headlines, focus on connecting with your tax professional and Wealth Manager to understand how new rules may impact you. Proactive planning can materially improve outcomes over the long term. Please reach out to your Wealth Manager with questions.
Disclosure and Source
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