401(k)

A 401(k) is an employer-sponsored retirement plan that allows employees to contribute pre-tax (Traditional) or after-tax (Roth) dollars directly from their paycheck. Many employers offer matching contributions, making this one of the best ways to save for retirement.

2026 IRS Contribution Limits

Employee Contribution$23,500

Catch-Up (50+)+$7,500

Super Catch-Up (60-63)+$11,250

Total (Employer + Employee)$70,000

Key Details

Always contribute at least enough to get the full employer match - it's essentially free money with an immediate 100% return.

Traditional 401(k) contributions reduce your taxable income for the current year.

Roth 401(k) contributions are made with after-tax dollars but grow and are withdrawn tax-free.

Loans may be available from your 401(k), but early withdrawals generally incur a 10% penalty before age 59 1/2.

Required Minimum Distributions begin at age 73 for Traditional 401(k) accounts.

Consider your current vs. expected future tax bracket when choosing between Traditional and Roth.