Short answerA 401(k) pulls retirement savings straight from your paycheck. In 2026 you can defer up to $24,500 of your own pay. Many employers match part of it. The match is part of your pay, but only if you contribute.
What a 401(k) is
It is a retirement plan your employer sponsors. You pick a contribution amount, and it leaves your paycheck automatically.
The plan offers investment options you choose from. Your money grows inside the account until retirement.
Pre-tax vs Roth
Pre-tax contributions lower your taxable income now. You pay tax when you withdraw in retirement.
Roth contributions use after-tax dollars. Qualified withdrawals in retirement are tax-free. The mix depends on your tax picture now versus later.
The match
Many employers match a slice of your contributions. One example formula: fifty cents per dollar up to six percent of pay. That is an example, not a rule.
The match is part of your pay. Contribute at least enough to capture the full match. Check your plan documents for the exact formula.
Vesting in plain English
Your own contributions are always one hundred percent yours. Employer match money can vest over time.
Vesting is the schedule that decides how much match money you keep if you leave. Leave early and some of it stays behind.
The 2026 limits
New for 2026: if your prior-year wages topped $150,000, catch-up contributions must go in as Roth.
- $24,500: the most you can defer from your own pay.
- $8,000 catch-up at age 50 and older, for a $32,500 total.
- $11,250 super catch-up at ages 60 to 63, for a $35,750 total.
- $72,000: the combined employee plus employer limit.