2027 401(k) and IRA limit projection: $25,000 or $25,500, the math

The first two of the three inflation reports that decide next year’s 401(k) limit are now in, and August tipped the scale. The short answer: applying the statutory formula in 26 U.S.C. §402(g)(4) to the CPI data published through August 2026 puts the 2027 401(k) limit on a genuine coin flip between $25,000 and $25,500 — August rose 0.32% over July, and September now only needs to rise about 0.04% more to clear the $25,500 threshold; the IRA limit remains on track to rise to $8,000, and it is now close to locked in. None of this is official. The Internal Revenue Service sets the confirmed figures in a Notice each November, and one of the three months the formula requires is still unpublished.

The 2027 picture, at a glance

Limit	2026 (official)	2027 (central projection)	Exact CPI threshold
401(k) / 403(b) / 457 elective deferral	$24,500	$25,000 or $25,500 (coin flip)	Q3 2026 CPI-U average ≥ 334.67 for $25,500 (September ≥ 335.112)
IRA	$7,500	$8,000 (nearly locked in)	Q3 2026 CPI-U average ≥ 333.18 for $8,000 (September ≥ 330.642)
Catch-up contribution, age 50+	$8,000	$8,000 or $8,500 (coin flip)	Same 334.67 threshold as the 401(k) deferral

The 2026 column is confirmed, from IRS Notice 2025-67. Everything in the other two columns is this page doing arithmetic the statute prescribes, not the IRS speaking.

The law behind the number

Most coverage of these limits treats the annual increase as a mystery the IRS reveals each fall. It is not. The 401(k) elective deferral limit is indexed by a formula written directly into the tax code, at 26 U.S.C. § 402(g)(4), and the text is exact about how the adjustment works:

“the Secretary shall adjust the $15,000 amount under paragraph (1)(B) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2005, and any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500.”

Worth flagging up front: this is a different clock than the one running most of the other 2027 numbers on this site. The 401(k), catch-up, and IRA limits here index off a single third-quarter CPI-U average, not the 12-month-to-August C-CPI-U window the IRS 2027 inflation adjustments tracker uses for the brackets, the FSA cap, and the gift exclusion — so the two pages are watching different BLS releases even though both are projecting 2027 IRS numbers.

In practice, the IRS applies that instruction using CPI-U — the Bureau of Labor Statistics’ broad urban consumer price index, not seasonally adjusted — averaged over the third calendar quarter, July through September. The IRA limit follows the identical mechanic under a separate provision, § 219(b)(5)(C), with its own $5,000 base and a base period anchored to 2007 instead of 2005; its rounding language is just as explicit, requiring any adjusted amount that is not a multiple of $500 to round down to the next lower multiple of $500. The age-50 catch-up contribution is indexed under yet a third provision, § 414(v)(2)(C), using the same $5,000-and-2005 mechanics as the elective deferral limit itself. A separate, larger catch-up applies to savers ages 60 through 63 under SECURE 2.0; that figure sits outside this projection, and the full retirement contribution limits 2025-2026 guide covers where it currently stands.

The control: reproducing 2026, three for three

A formula is only as trustworthy as its ability to reproduce a known answer, so before projecting anything, it is worth running 2026 back through the statute and checking it against what IRS Notice 2025-67 actually set. The base-period average CPI-U for the third quarter of 2005 — July at 195.4, August at 196.4, September at 198.8 — comes to 196.867. The 2025 measurement quarter, averaging July’s 323.048, August’s 323.976 and September’s 324.800, comes to 323.941.

For the 401(k) deferral: 15,000 × (323.941 / 196.867) = $24,682, which rounds down to the next lowest multiple of $500 — $24,500. That is exactly the 2026 limit.

For the catch-up, run off the same base and the same ratio: 5,000 × (323.941 / 196.867) = $8,227, rounding down to $8,000. Exactly the 2026 catch-up.

For the IRA, swap in its own base period — the 2007 third-quarter CPI-U average of 208.235 (July 208.299, August 207.917, September 208.490) — against a $5,000 base: 5,000 × (323.941 / 208.235) = $7,778, rounding down to $7,500. Exactly the 2026 IRA limit.

Three inputs, three outputs, three exact matches against the official Notice. That is the same discipline this site applies to tracking the Social Security COLA: reproduce the confirmed prior figure with the statutory formula before trusting the formula to project the next one.

The threshold that decides 2027: 334.67

With the method validated, the only open question for 2027 is what September 2026’s CPI-U turns out to be. Two of the three months are now published: July came in at 333.918, essentially flat against June, and August followed at 334.980, a rise of 0.32% month over month. Two-thirds of the answer is now fixed.

For the 401(k) deferral to reach the next $500 step and land at $25,500 rather than $25,000, the unrounded result has to clear 25,500, which requires the index ratio to hit 25,500 / 15,000 = 1.7 — or, solved for the index itself, 1.7 × 196.867 = 334.67. With July and August summing to 668.898, the quarter clears that bar the moment September reaches 335.112 — only 0.04% above August’s level. That is no longer a stretch; it is close to a genuine coin flip, decided by whichever way one ordinary month of data breaks. For context, September 2025 rose 0.25% over August of that year, from 323.976 to 324.800 — a move that size this year would be more than enough on its own.

The age-50 catch-up shares that exact same fork, for a clean reason: both provisions index off the identical 196.867 base and the identical $5,000-scaled-to-$15,000 relationship, so the ratio needed for $8,500 — 5,000 × ratio ≥ 8,500, or ratio ≥ 1.7 — is the same ratio needed for $25,500, and the same September figure of 335.112 decides both. Either the Q3 average clears 334.67 and both the deferral and the catch-up step up together, to $25,500 and $8,500, or it does not and both stay put, at $25,000 and $8,000.

The IRA sits on much friendlier ground. Its threshold for the next step, to $8,000, is a Q3 average of 8,000/5,000 × 208.235 = 333.18 — and with July and August summing to 668.898, September would have to fall to 330.642 or below, a decline of more than 1.3% in a single month, to miss it. Barring a move of that size, the IRA limit rises from $7,500 to $8,000, and it is now the clearest of the three outcomes on this page — while the 401(k) and catch-up fork remains a genuine toss-up until the September print lands.

None of this lines up with how other 2027 numbers already work. The 2027 HSA contribution limits were confirmed by the IRS back in May, because HSA indexing runs on a different calendar. The 2027 Social Security wage base is likewise still a projection — though its input is the national average wage index rather than CPI, so it moves on different data. The 401(k) and IRA limits sit furthest out on that calendar: the underlying CPI-U quarter will not even finish until September 30, 2026.

The calendar: one print left before the IRS speaks

One more CPI-U release stands between today and a confirmed number. July’s reading arrived on August 12 (333.918); August’s followed on September 11 (334.980, covered above); September’s, the final data point the formula needs, lands in mid-October. Once that figure publishes, the Q3 2026 average is fixed, and the 2027 401(k), IRA and catch-up limits can be calculated with certainty, weeks before the IRS makes anything official.

The IRS itself will not confirm anything until its own Notice, typically issued in November, the way Notice 2025-67 set the 2026 figures in November 2025. Expect the same pattern this year: a formal Revenue Procedure or Notice sometime in November 2026, restating whatever the arithmetic above will have already settled by mid-October.

This page will be updated after the September release. For now, the honest framing is a coin flip for the 401(k) deferral and catch-up — $25,000 or $25,500, and $8,000 or $8,500 — decided by whether September clears 335.112, while the IRA’s rise to $8,000 is close to locked in. The formula reproduces the IRS’s own 2026 numbers exactly; it has simply not been handed September’s input yet, and only the IRS’s November Notice will make any of these figures official. See the 2027 health FSA projection for how the same kind of forecast plays out on a smaller, faster-moving cap.