How employer match turns into free money
The most common 401(k) match structure is dollar-for-dollar up to a set percentage of your salary — for example, "100% match up to 4%." If you earn $70,000 and contribute at least 4% ($2,800), your employer adds another $2,800 automatically. Contribute less than that percentage, and you leave part of that match unclaimed every single paycheck. Most financial planners consider capturing the full match the very first priority in any retirement savings plan, ahead of even IRA contributions, because there's no equivalent guaranteed return anywhere else.
2026 contribution limits, explained
The IRS sets an annual cap on how much you personally can defer into a 401(k). For 2026, that limit is $24,500 for anyone under 50. Workers 50 and older can add a standard $8,000 catch-up contribution, for a total of $32,500. Under the SECURE 2.0 Act, workers specifically ages 60-63 get an even larger "super catch-up" of $11,250 instead of the standard catch-up, bringing their total to $35,750. These limits apply to your own contributions only — employer match doesn't count against them, though a separate combined limit of $72,000 applies to employee and employer contributions together.
Should you max out your 401(k)?
Maxing out isn't required to benefit from a 401(k) — capturing the full employer match matters more for most savers than hitting the IRS limit. After the match is fully captured, the next question is whether additional savings should go to the 401(k), a Roth IRA, or a taxable brokerage account, which depends on your current tax bracket, expected retirement tax bracket, and how soon you might need the money. Our Roth vs Traditional IRA guide walks through that trade-off in more detail.
What this calculator assumes
This tool models annual compounding, applies the IRS contribution limit each year based on your age (including the 50+ and 60-63 catch-up rules), and grows your salary at your specified rate each year. It does not account for vesting schedules on employer contributions, plan fees, or changes to future IRS limits — all of which can shift your real-world results.