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401(k) Guide: 2026 Limits, Matches & Withdrawals

Reviewed by Unpack Money Research Desk · Updated October 28, 2026 · Our review process

Quick answer

A 401(k) is an employer-sponsored retirement plan funded from your paycheck — pre-tax (traditional) or after-tax (Roth 401(k)), if your plan offers both — and your employer may add matching or nonelective contributions. For 2026 the employee elective deferral limit is $24,500 ($32,500 at 50+, $35,750 at ages 60–63). Your plan's own rules govern investment choices, match formulas, vesting, loans, and withdrawals; the IRS sets the outer limits.

A workplace retirement account, funded from your paycheck

A 401(k) is an employer-sponsored retirement plan. You elect to defer part of your salary into the account — pre-tax (traditional) or after-tax (Roth 401(k)), if your plan offers both — and your employer may add matching or nonelective contributions. Your plan's own rules govern investment choices, match formulas, vesting, loans, and withdrawals; the IRS sets the outer limits.

2026 limits

Your plan may impose a lower limit, and highly compensated employees may face additional nondiscrimination limits. The $24,500 deferral limit aggregates across all 401(k)/403(b) plans you participate in during the year.

Total-additions catch-up figures are not stated here: they were not corroborated against the primary IRS source for this page, so they are omitted rather than stated. Only the $72,000 base total-additions figure is stated.

The employer match: free money with strings

A common structure is a percentage match on a percentage of pay — for example, a plan might match a portion of the first several percent you contribute — but formulas vary widely and none is assumed here. Three things to check in your plan document: (1) How much must you contribute to get the full match? Contributing below that threshold leaves match money unclaimed. (2) What is the vesting schedule? Your own contributions are always yours; employer contributions may vest over time. (3) Is there a true-up? Some plans reconcile the match annually; others do not, so front-loading contributions can change the match you receive.

Traditional vs. Roth 401(k)

Traditional (pre-tax): reduces taxable income now; withdrawals are generally taxable.

Roth 401(k): after-tax contributions; qualified withdrawals are generally tax-free.

Both share the single $24,500 deferral limit. Unlike Roth IRAs, Roth 401(k)s have no income limit on contributing — eligibility comes from employment, not MAGI. Required minimum distribution rules for Roth 401(k)s changed under SECURE 2.0; check current IRS guidance for your situation rather than relying on older summaries.

Withdrawals, loans, and hardship

Withdrawals before age 59½ are generally taxable and may attract a 10% additional tax, subject to exceptions (including separation from service at age 55 or later for qualified plans). Many plans allow loans, but a loan that is not repaid on schedule — especially after leaving the job — can become a taxable distribution. Hardship withdrawals, where offered, are limited to specific needs and do not cure the underlying budget problem. Treat early access as a last resort, not a feature.

What happens when you leave a job

1. Leave it in the old plan (if the plan permits and the balance meets its minimum).

2. Roll it into a new employer's plan (if accepted).

3. Roll it into an IRA (preserves tax-deferred status; compare fees and investment options).

4. Cash it out — generally taxable, possibly plus the 10% additional tax, and permanently removed from retirement compounding.

Never let a rollover check be made payable to you personally without understanding the 20% mandatory withholding and 60-day rollover rules for eligible rollover distributions. A direct trustee-to-trustee rollover avoids most of that friction.

Worked example: the monthly deferral

$24,500 ÷ 12 ≈ $2,042 per month. Most people do not start at the limit. The practical sequence is: (1) contribute enough for the full employer match, (2) increase by 1 percentage point of pay each raise, (3) revisit the limit as income grows. A contribution rate you sustain for decades beats a maximum rate you abandon in six months. Arithmetic, not a recommendation.

Disclosure and disclaimer

Disclosure: Unpack Money currently earns $0 in affiliate revenue and has no approved affiliate programs. No affiliate links appear here.

Disclaimer: Educational only — not financial, investment, or tax advice. Plan rules vary; read your summary plan description and verify current IRS limits before acting. Plan-specific match formulas, vesting schedules, loan rules, and state-tax treatment vary by employer plan and state, and are not stated as universal here.

At a glance

2026 401(k) limits (verified 2026-10-28, IRS)

What this means for you

The 401(k) sequence that matters most is unglamorous: get the full match, then raise your rate with each raise toward the limit. Read your own plan document for the match, vesting, and loan rules — the IRS limits are only the outer frame.

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