How a 401(k) builds wealth
A 401(k) is an employer-sponsored retirement account funded straight from your paycheck. It builds wealth through three engines working together: your contributions, your employer's match, and tax-advantaged compound growth. Over a career, the second and third engines often contribute more than your own deposits — which is why starting early and capturing the full match matter so much.
Capture the full employer match
With a “50% up to 6%” match, your employer adds 50 cents for each dollar you defer, on deferrals up to 6% of your pay (in 2026 the match can count pay only up to $360,000). The match is an employer contribution paid under your plan's terms, not an investment return: whether you keep it depends on those terms, including any vesting schedule, and an employer can change its match. If you contribute below your match cap, the calculator above shows how many match dollars a year you would leave unclaimed.
One caution: many employer matches are subject to a vesting schedule — you may need to stay a few years before the matched money is fully yours. Your contributions are always 100% vested; the match may not be. Check your plan's vesting rules.
2026 contribution limits
- Employee deferral: $24,500 ($32,500 with the $8,000 catch-up, from the calendar year you turn 50; in the years you turn 60 to 63 the catch-up is $11,250, for $35,750).
- Combined limit (your contributions + employer match + any after-tax): $72,000.
- Workers aged 60–63 have a higher SECURE 2.0 “super catch-up.”
The employer match does not count against your $24,500 employee limit — it falls under the higher combined cap. High earners who max the employee limit sometimes use the mega backdoor Roth (covered in our backdoor Roth guide) to put even more into Roth treatment.
Traditional vs Roth 401(k)
Many plans let you split contributions between a traditional 401(k) (pre-tax now, taxed in retirement) and a Roth 401(k) (taxed now, tax-free in retirement). The right mix depends on whether you expect a higher or lower tax rate in retirement. Most employers make the match pre-tax. Since SECURE 2.0, a plan may let you take the match as Roth instead, which means you pay tax on it now (IRS Notice 2024-2).
Frequently asked questions
How does the employer match work?
The employer adds money based on what you contribute — e.g. “50% up to 6%” means 50¢ per $1 on the first 6% of salary. Contribute at least up to the cap to capture all of it.
What is the 2026 401(k) limit?
$24,500 for employees ($32,500 from the year you turn 50; $35,750 in the years you turn 60 to 63). The combined employee-plus-employer limit is $72,000.
Does the match count toward my limit?
No — the employer match is separate from your $24,500 employee deferral limit.