401(k) Contribution Limits and Employer Match, Explained

The 2026 limits

For 2026, the employee elective-deferral limit for most 401(k), 403(b), governmental 457 plans, and the federal TSP is $24,500. The general catch-up for participants age 50 or older is $8,000, allowing $32,500. Participants ages 60 through 63 may have a higher $11,250 catch-up under applicable plan rules.

The overall defined-contribution limit for employee and employer contributions is $72,000 in 2026, excluding eligible catch-up contributions. Compensation and plan-specific rules can impose additional limits. Limits change, so verify the tax year and plan document before acting.

Traditional and Roth 401(k) employee deferrals generally share the same elective-deferral limit; it is not a separate limit for each tax treatment.

Decode the employer match

“100% of the first 3% and 50% of the next 2%” means the employer contributes at most 4% of eligible pay when the employee contributes 5%:

• first 3% × 100% = 3%;
• next 2% × 50% = 1%;
• maximum match = 4% of eligible pay.

On an $80,000 salary, a 5% employee contribution is $4,000 and the maximum match is $3,200. Contributing only 3% receives $2,400 and leaves $800 of available annual match unused.

Use the 401(k) calculator to model pay raises, match, contribution rate, and growth. Confirm whether bonuses count as eligible compensation and whether the plan matches each paycheck or provides a year-end true-up.

Per-paycheck timing can matter

Some plans calculate match separately every pay period. Reaching the annual employee limit early can eliminate later deferrals and therefore later match unless a true-up restores it. Divide the intended annual contribution across remaining pay periods and read the plan’s summary description.

Vesting determines what you keep

Employee deferrals are always the employee’s money. Employer contributions may vest immediately or over a cliff or graded schedule. Leaving before full vesting can forfeit the unvested portion, though service-counting rules and rehire provisions vary.

Vesting should enter a job-offer comparison. A larger nominal match with a long schedule may be worth less to someone unlikely to remain.

Contribution order and investments

Capturing the full match is often a strong first priority. Beyond that, compare high-interest debt, emergency savings, plan fees, IRA eligibility, and tax treatment. The contribution limit is a ceiling, not a personalized target.

Contributing does not invest the money automatically in every plan. Verify the selected funds, diversification, expense ratios, and beneficiary designation. A large contribution left in cash can miss the intended long-term growth.

Frequently asked questions

Does employer match reduce my $24,500 employee limit?

Generally no; employer contributions count toward the larger overall plan limit, not the employee elective-deferral limit.

Can I contribute to both traditional and Roth 401(k)?

If the plan allows it, yes, but combined employee deferrals remain subject to one shared limit.

What happens if I change jobs?

Deferrals across employers generally share the annual limit. Track the total yourself; unrelated payroll systems may not coordinate it.