We swaddled our son until he was nine months old. Obviously we never planned on doing that, but he loved it and was comfortable that way and our pediatrician said it was no big deal. We didn't transition until he learned to flip himself while swaddled and could not flip back himself over. Which, watch out for - it seems impossible until the night they do it!
What we did when he got too big for swaddlers was use two larger sized blankets (Gerber makes nice big soft thin ones, we got them at Target). One folded into a triangle, with the point near his feet, then the outer points wrapped around his arms (over the arms and then under the back, sort of like how a miracle blanket works.) Then another blanket, also folded into a big triangle, wrapped around that with the seam under his back and sort of tucked up into the first.
Ignore anyone that says she's "too old" to be swaddled. Yes, most babies are over it by that age. But some are not, and there is nothing wrong with continuing to do it at bedtime if they really like it. As our pediatrician put it "He's not learning large motor skills in his sleep."
Edited: I'm not going to defend against the "impaired motor skills" argument - my son was not particularly early on any of his milestones. But he was also late-preterm and anyway, he wasn't "delayed." And he never used a pacifier (much harder habit to break, from what I read, than the swaddle.) At 19 months he's totally developmentally on track and a good sleeper. The swaddle might not be for everyone, but it was awesome for us. Point me to an adult human who can't walk or hold his head up because he was "swaddled too long" and maybe, just maybe, I'll change my mind...