Your 401k Details
Understanding Your 401k
A 401k is one of the most powerful retirement tools available, primarily because of employer matching and tax advantages. If your employer offers a match, not contributing enough to capture the full match is literally leaving free money on the table.
How Employer Matching Works
A "50% match up to 6%" means if you contribute 6% of your salary, your employer adds 3%. If you contribute 10%, you still only get 3% because of the cap. Always contribute at least enough to get the full match.
2026 IRS Contribution Limits
- Under 50: $23,500 per year
- Age 50+: $31,000 (includes $7,500 catch-up)
Traditional vs Roth 401k
Traditional 401k contributions reduce your taxable income now but are taxed in retirement. Roth 401k contributions use after-tax dollars but grow and withdraw tax-free. If you expect to be in a higher tax bracket in retirement, Roth may save you money long-term.
401k vs IRA: Which First?
Max out your employer match first — it is free money. Then consider an IRA for more investment options. Return to your 401k if you still have room to save, as the tax advantages are identical.
Frequently Asked Questions
What is the 401k contribution limit for 2026? +
For 2026, the IRS limit is $23,500 for those under 50. If you are age 50 or older, you can contribute an additional $7,500 as a catch-up contribution, for a total of $31,000.
Should I max out my 401k? +
Max out your 401k if you can afford it, especially if you have high income and want to reduce your tax bill. However, make sure you have an emergency fund first and are not carrying high-interest debt. A common priority: employer match → emergency fund → high-interest debt → max 401k → IRA → taxable investments.
What happens to my 401k if I change jobs? +
You have four options: leave it with your old employer, roll it over to your new employer's 401k, roll it into an IRA, or cash it out. Cashing out triggers taxes and a 10% penalty if under age 59½. Rolling over to an IRA usually gives you the most investment options.
When can I withdraw from my 401k without penalty? +
Generally at age 59½. Withdrawals before that incur a 10% early withdrawal penalty plus ordinary income tax, with limited exceptions (hardship withdrawals, Rule of 55 if retiring that year, etc.).