Maxing Out Your 401(k): What It Actually Takes
Early career, the conversation is about getting started. A decade in, the question becomes: how do you actually build significant wealth? The 401(k) is still at the center of the answer. But now the goal isn't the match. It's the maximum.
The 2026 Numbers
The employee deferral limit for 2026 is $24,500. Employer match sits on top of that and doesn't count against your limit.
The Tax Arithmetic
Every dollar contributed to a traditional 401(k) reduces your taxable income for that year. In the 24% federal bracket, contributing the full $24,500 reduces your federal tax bill by $5,880.
The bottom line
The government is effectively subsidizing your retirement savings. The higher your bracket, the larger that subsidy.
The Path to Maxing Out
Jumping from 6% to maximum in one year would significantly disrupt cash flow for most people. The sustainable path is incremental.
Traditional vs. Roth: Does Your Plan Offer Both?
Many 401(k) plans now offer both options. Many people contribute to whatever the plan defaulted them into without realizing a choice exists.
- 22% bracket or below: Roth 401(k) often makes sense
- 32% bracket or above: Traditional generally makes more sense
- 24% bracket: it's close - consider splitting contributions for tax diversification
What would you do?
Jordan and Maya are both 33, earning a combined $185,000. Maya contributes 6% - just enough for the employer match.
Your Move
Log into your 401(k) and check your current contribution percentage. Check whether your plan offers both traditional and Roth options - many people don't know both exist. Consider increasing by 1-2% today and scheduling another increase in 6 months.
Sources
- Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.
Educational content only. Not financial, tax, or legal advice. Consult a qualified professional before making decisions based on your specific circumstances.
Last reviewed: April 2026