Updated June 15, 2026 · 5 min read
Two rules of thumb cover most people: always contribute enough to capture your full employer match (it's free money), and aim for about 15% of your income toward retirement, including that match. In 2026 you can defer up to $24,500 of your own pay into a 401(k) ($32,500 if you're 50+). Because traditional 401(k) contributions are pre-tax, they also shrink your taxable income — so your take-home pay drops by less than you contribute.
If your employer matches contributions — say, 50% of the first 6% you put in — that match is an instant, guaranteed return. Contributing less than the amount needed to get the full match leaves part of your compensation on the table.
| Who | Your contribution limit |
|---|---|
| Under 50 | $24,500 |
| Age 50–59 or 64+ (with catch-up) | $32,500 ($24,500 + $8,000) |
| Age 60–63 (super catch-up, if plan allows) | $35,750 ($24,500 + $11,250) |
| Combined employee + employer | $72,000 |
The $24,500 limit is the cap on your own pre-tax and Roth deferrals combined, across all 401(k)/403(b) plans you participate in. Employer match does not count against it — but the total from all sources can't exceed $72,000.
Traditional (pre-tax) 401(k) contributions come out before income tax is calculated, so they lower both your retirement savings shortfall and your current tax bill. The cost to your take-home pay is therefore less than the dollar you contribute.
At a minimum, contribute enough to get your full employer match. A common target is 15% of your gross income toward retirement, including the match. Increase your rate by 1% a year if you can't get there immediately.
In 2026 you can contribute up to $24,500 of your own pay. If you're 50 or older you can add an $8,000 catch-up ($32,500 total); ages 60–63 may add $11,250 instead ($35,750 total) if the plan allows. Combined employee + employer contributions are capped at $72,000.
A traditional (pre-tax) 401(k) contribution reduces your taxable income, lowering your federal and usually state income tax for the year. It does not reduce Social Security or Medicare tax. Roth 401(k) contributions give no upfront break but grow tax-free.
Less than the amount you contribute, for a traditional 401(k). If you're in the 22% bracket, a $200 contribution cuts take-home by roughly $156 because you skip income tax on that money (FICA still applies).