401(k) Contribution Strategies: Maximize Your Employer Match

For 2026, the employee contribution limit is $24,500 for those under age 50. Employees age 50 and older can contribute an additional $8,500 in catch-up contributions, for a total of $33,000. These limits are adjusted annually for inflation by the IRS.

An employer match is free money your employer contributes to your 401(k) when you contribute. It typically ranges from 25% to 100% of your contribution up to 3-6% of your salary. Maximizing the match is like getting an instant raise—it's guaranteed extra money for retirement. Not capturing your full match is leaving free money on the table.

At minimum, contribute enough to capture your full employer match. If your match is 50% up to 6%, contribute 6% of your salary. Ideally, contribute 10-15% of your gross income including the employer match. If that's not possible immediately, start with the match and increase contributions by 1% annually as your salary grows.

Yes. Most employers allow you to adjust contributions at any time, though some restrictions may apply. You can typically adjust contributions through your benefits portal or by contacting your benefits administrator. Changes usually take effect in the next pay period. Use life changes like raises or bonuses to increase your contribution percentage.

Catch-up contributions allow employees age 50 and older to contribute an additional $8,500 to their 401(k) in 2026 (beyond the standard $24,500 limit). This provision helps older workers boost their retirement savings if they got a late start or want to accelerate retirement readiness in their final working years.

Generally, contribute enough to capture your full employer match first—that's immediate guaranteed returns. For high-interest debt (credit cards over 8%), prioritize paying that down. For lower-interest debt (mortgages under 4%, student loans at 4-6%), consider maximizing 401(k) contributions while managing debt payments, as the investment returns typically exceed the interest rates.

Traditional 401(k) contributions reduce your current taxable income, and withdrawals in retirement are taxed as ordinary income. Roth 401(k) contributions are made after-tax, but qualified withdrawals in retirement are tax-free. Choose Roth if you expect to be in a higher tax bracket in retirement or want tax-free growth; choose traditional if you're currently in a high bracket and expect lower tax rates in retirement.

Many 401(k) plans allow loans up to $50,000 or 50% of your balance (whichever is less). However, borrowing should be a last resort—you lose investment growth on borrowed amounts, must repay with interest, and face penalties if you leave your job before repaying. Use emergency savings first; borrow from 401(k) only in genuine emergencies.

Assuming you contribute $24,500/year with a 50% employer match ($12,250), that's $36,750 annually. Over 30 years with 7% average annual returns, you'd accumulate approximately $3.2 million. Adding Social Security (estimated $30,000+/year) creates strong retirement income. Combined with other retirement accounts, maximizers often retire with $2-5M+ in assets.

A mega backdoor Roth allows high earners to contribute after-tax amounts beyond the $24,500 limit—up to the $69,000 annual combined limit. You can immediately convert these after-tax contributions to a Roth IRA. This is only available if your plan specifically allows after-tax contributions and conversions. Consult your plan administrator or a tax professional to verify eligibility.

A common guideline is "110 minus your age in stocks." At age 35, hold 75% stocks and 25% bonds. At age 55, hold 55% stocks and 45% bonds. Alternatively, use your plan's target-date retirement fund that automatically rebalances. Ensure your core holdings are low-cost index funds with expense ratios under 0.20% to minimize fees.

A safe harbor 401(k) requires employers to make mandatory employer contributions (usually 3% non-elective) regardless of whether employees contribute. These plans often have higher contribution limits and fewer compliance restrictions. They're popular with business owners and small businesses wanting to maximize their own retirement savings while maintaining flexibility.

Maxing out ($24,500 in 2026) depends on your financial situation. If you have high income and can afford it without sacrificing emergency savings or other goals, it's excellent. Six-figure earners should strongly consider maxing it out, as it provides substantial tax deductions. If you're middle-income, prioritize capturing the match first, then maximize Roth IRA, then return to maximizing 401(k).