If you work in the US, retirement saving starts with the 401(k) — an employer-based retirement account that stacks tax breaks on top of company matching (free money). Not using it is leaving pay on the table. But Traditional vs Roth, how much you can contribute, and what happens when you change jobs all get confusing. Here's the 2026 rundown of limits, matching, taxes, and withdrawals.
What is a 401(k)?
A 401(k) is an employer-provided retirement plan. Money is deducted from your paycheck automatically and invested, with tax advantages. Three things make it powerful — tax deferral, employer match, and automatic saving.
- Tax break: save on taxes going in (Traditional) or coming out (Roth).
- Employer match: your company adds a percentage on top of what you contribute (e.g., 3–6% of pay).
- Compounding: it grows tax-deferred over time (see our compound interest calculator).
2026 contribution limits
| Item | 2026 limit |
|---|---|
| Elective deferral (you) | $24,500 |
| Catch-up, age 50+ | +$8,000 (total $32,500) |
| Super catch-up, ages 60–63 | +$11,250 (that age band only) |
| You + employer match combined | Around $70,000+ (separate cap) |
These limits are on what you contribute. The employer match is on top, so with matching your actual savings are larger.
Traditional vs Roth 401(k)
Same account, but when you pay tax differs.
| Item | Traditional | Roth |
|---|---|---|
| Going in | Tax-deductible (lowers taxable income) | After-tax (no deduction) |
| Coming out | Withdrawals fully taxed | Principal + gains tax-free |
| Better when | Your tax rate is high now | Your rate will be higher later (young/early-career) |
Simplified: it's your tax rate now vs. in retirement. Roth often wins when young and low-income; Traditional when income and rates are high. See US tax brackets.
Employer match: get this at minimum
One rule above all — contribute at least up to the match. If your company matches "100% up to 4% of pay," contributing 4% gets you another 4% free. That's an immediate 100% return; skipping it throws away part of your pay.
Watch vesting. Employer match often becomes "yours" only after a service period (e.g., 100% after 3 years). Before changing jobs, check how much of your match is vested. Your own contributions are always 100% yours.
Job changes and withdrawals
- Changing jobs: roll your old 401(k) into the new plan or an IRA tax-free.
- Early withdrawal: before 59½, taxes + a 10% penalty (some exceptions). Avoid it.
- Normal withdrawal: allowed after 59½. Traditional has required minimum distributions (RMDs) from 73.
Example: $80,000 salary, 4% match
Say you earn $80,000 with a 100% match up to 4%. ① Contribute at least 4% ($3,200) to capture the $3,200 match — instantly doubled. ② If you can, raise it toward the $24,500 limit. ③ Traditional to cut taxes now, Roth for tax-free later. ④ Extra capacity goes to an IRA. The order "match first → fill the limit → add IRA" is the classic playbook.
Checklist
- ☐ Know your match rate/cap → contribute at least that much
- ☐ Choose Traditional vs Roth (rate now vs. in retirement)
- ☐ Review your investment allocation (target-date funds, etc.)
- ☐ Check the vesting schedule (especially before leaving)
- ☐ On job change, consider an IRA rollover (don't cash out)
- ☐ No withdrawals before 59½ (10% penalty)
FAQ
Q. What if my employer has no 401(k)?
An IRA is the alternative — an account you open yourself. Self-employed people also have Solo 401(k)s and SEP IRAs.
Q. Is a 401(k) worth it without a match?
Yes — tax deferral and automatic saving still help. But with no match, filling a low-fee IRA first, then the 401(k), is worth considering.
Q. Does a Roth 401(k) have income limits?
A Roth IRA has income limits, but a Roth 401(k) does not — high earners can contribute up to the limit, making it a useful Roth channel for them.
Q. How does this compare to Korea's national pension?
Korea's national pension is a public plan; a 401(k) is a private account you manage. They complement each other. See our national pension calculator.
The 401(k) playbook is "match first, then the limit, then IRA." The employer match is an instant 100% return — if nothing else, always capture the full match.
This is general information based on 2026 rules, not tax or investment advice. Limits and rates change yearly and depend on your situation — consult a CPA or financial planner. See also our IRA guide and Social Security guide.
