401(k)

A 401(k) is the dominant US employer-sponsored retirement plan. Employees elect a percentage of salary to defer into the plan, where it’s invested in a menu of funds chosen by the employer’s plan sponsor. The default is pre-tax — the contribution reduces this year’s federal income tax (and most state income tax), with distributions in retirement taxed as ordinary income. A growing number of plans also offer a Roth 401(k) option: contribute post-tax now, withdraw tax-free in retirement.

The 2026 contribution limits:

• Employee elective deferral: $23,500 ($31,000 if age 50+, with a higher $34,750 “super catch-up” for ages 60–63 under SECURE 2.0).
• Total annual addition (employee + employer match): $70,000.
• Highly compensated employee thresholds and non-discrimination testing add nuance for top earners — talk to HR or the plan administrator.

Most plans include an employer match — the single most important reason to contribute. A typical match is 100% on the first 3% plus 50% on the next 2%, giving an effective 4% employer contribution if the employee defers 5%. Not capturing the full match is leaving money on the table.

Use the 401(k) calculator to project the pot at retirement under different deferral rates and employer-match scenarios.