401(k) Contribution Limits
A 401(k) is the primary retirement savings vehicle for most American workers, and the annual IRS limits determine how much compensation can move into the plan each year on a tax-favored basis. For 2026, employees can defer up to $24,500 pre-tax or Roth, with an additional $8,000 catch-up for many workers age 50 or older and an enhanced $11,250 catch-up for eligible workers ages 60-63 under SECURE 2.0. Employer contributions sit on top of those elective deferrals, subject to the separate annual-additions cap. Because these indexed limits move over time, using stale numbers can materially distort retirement-planning math.
Current Law (2026)
Employer-sponsored 401(k) plans allow employees to defer a portion of their salary on a pre-tax or Roth basis, subject to annual limits set by the IRS.
| Parameter | 2026 Value |
|---|
| Employee elective deferral limit | $24,500 | | Catch-up contribution (age 50+) | $8,000 | | Enhanced catch-up (ages 60-63) | $11,250 | | Total limit (employee + employer) | $72,000 | | Total with catch-up (50+) | $80,000 | | Total with enhanced catch-up (60-63) | $83,250 | | Compensation limit for calculations | $360,000 |
Legal Authority
- 26 U.S.C. § 401 — Sets the requirements for tax-qualified retirement plans, including the cash-or-deferred arrangement (CODA) rules that enable 401(k) plans to accept pre-tax employee deferrals
- 26 U.S.C. § 402(g) — Caps the annual dollar amount of elective deferrals excluded from an employee's gross income ($24,500 in 2026); any amount above this limit is taxable in the contribution year and again in the distribution year
- 26 U.S.C. § 414(v) — Authorizes catch-up contributions for participants age 50 and older and sets the indexing formula; SECURE 2.0 Section 109 amended this section to add the enhanced catch-up for ages 60-63
- 26 U.S.C. § 415(c) — Sets the annual additions limit — the overall cap on all contributions (employee + employer) to defined contribution plans — currently $72,000 for 2026; prevents stacking unlimited employer contributions on top of employee deferrals
- 26 U.S.C. § 414(s) — Defines "compensation" for plan purposes, setting the basis on which percentage-based matching formulas are calculated and capping the compensation used in any plan formula at $360,000 in 2026 (the § 401(a)(17) limit applies)
- SECURE 2.0 Act Section 109 — Enhanced catch-up for ages 60-63 (amending § 414(v))
- SECURE 2.0 Act Section 101 — Required automatic enrollment in new 401(k) plans established after December 29, 2022
How It Works
The $24,500 elective deferral limit (IRC § 402(g)) applies to the combined total of pre-tax and Roth 401(k) contributions — you can split them any way you like, but the sum can't exceed $24,500. Pre-tax contributions reduce taxable income dollar-for-dollar now (a 24% bracket taxpayer saving $5,880 on a full contribution); Roth provides no current deduction but grows and withdraws tax-free in retirement. Employer contributions — matches, profit-sharing, nonelective contributions — are entirely separate and count toward the annual additions limit under IRC § 415(c): $72,000 in 2026. A self-employed person with a Solo 401(k) can stack employee deferrals ($24,500) with employer profit-sharing contributions (up to 25% of compensation) until hitting $72,000 — the most powerful retirement vehicle for high-income self-employed workers. SECURE 2.0 requires new 401(k) plans established after December 29, 2022 to automatically enroll eligible employees at an initial deferral rate of 3–10% of compensation, with automatic annual escalation of 1 percentage point until reaching at least 10%; employees can opt out, but auto-enrollment captures workers who wouldn't otherwise participate.
The $24,500 limit is per person across all employers in the calendar year — if you work two jobs that both offer 401(k)s or change jobs mid-year, your total employee deferrals across all plans cannot exceed $24,500. Exceeding the limit creates double taxation (taxable in the year contributed and again in the year withdrawn), correctable only by withdrawing the excess by April 15 of the following year. Hardship withdrawals under 26 CFR 1.401(k)-1 are available for "immediate and heavy financial need" — unreimbursed medical expenses, principal residence purchase, tuition, eviction/foreclosure prevention, funeral expenses, and certain casualty repairs — but carry a steep cost: taxable as ordinary income plus a 10% early withdrawal penalty before age 59½. A $30,000 hardship withdrawal in the 22% bracket plus the 10% penalty costs $9,600 in federal taxes and also forfeits all future tax-deferred growth those dollars would have generated.
How It Affects You
If you're not yet contributing enough to capture the full employer match: The employer match is the highest guaranteed return available in your financial life. A 100% match on 6% of salary means every dollar you contribute gets matched — a 100% immediate return before any investment gains. A 50% match on 6% is a 50% immediate return. On a $70,000 salary with a 50% match on 6%, capturing the full match means contributing $4,200 to get $2,100 in free employer money — $2,100/year you're forfeiting if you contribute less. The break-even on contributing to get the match is essentially immediate. Contribute at least to the match threshold before considering any other savings vehicle, including Roth IRAs, taxable accounts, or extra mortgage payments. If you don't know your company's match formula, check your plan summary document or ask HR.
If you're deciding between pre-tax and Roth contributions: Pre-tax 401(k) contributions reduce your taxable income today, while Roth contributions trade the current deduction for tax-free qualified withdrawals later. In 2026, the maximum elective deferral is $24,500, so the tax savings on a full pre-tax contribution can be substantial at higher marginal rates. Many savers still benefit from splitting contributions between traditional and Roth to diversify future tax exposure.
If you're between 55-63 and accelerating toward retirement: The catch-up rules now create a bigger tiered opportunity than this page previously reflected. Workers 50+ can contribute the standard $8,000 catch-up above the $24,500 base, for a total of $32,500 in employee deferrals. Workers ages 60-63 can contribute an enhanced $11,250 catch-up, for a total of $35,750. That four-year window is the highest employee-deferral opportunity in a typical 401(k) career.
If you work multiple jobs, are self-employed, or change jobs mid-year: The $24,500 employee elective-deferral limit applies across all employers in a calendar year, not per employer. If you max out at one job, you generally cannot make additional employee deferrals at another job that same year. Self-employed people using a Solo 401(k) can still combine employee and employer contributions up to the annual-additions limit, which rises to $72,000 in 2026 before catch-up contributions.
State Variations
ERISA preempts state regulation of 401(k) plans — states cannot impose their own contribution limits, vesting rules, or plan structure requirements. But state income tax treatment of contributions and distributions varies significantly:
Pennsylvania: PA does not allow pre-tax treatment of 401(k) contributions for state income tax purposes. A Pennsylvania resident contributing $24,500 to a 401(k) gets the full federal deduction but still owes PA income tax (3.07%) on that $24,500 in the year contributed — a $753 state tax bill the federal deduction doesn't eliminate. The flip side: qualified 401(k) distributions in retirement are fully exempt from PA income tax, regardless of amount. For Pennsylvania residents, 401(k) savings represent a pay-now-at-3.07% / exempt-at-retirement deal — generally still favorable, since investment growth is never taxed by PA.
New Jersey: NJ similarly does not allow a deduction for 401(k) contributions for state tax purposes (NJ personal income tax rates range from 1.4% to 10.75% depending on income). NJ does provide a retirement income exclusion for pension and 401(k) distributions for taxpayers with gross income below $150,000, but the exclusion phases out at higher incomes. NJ residents with significant retirement income may owe state tax on distributions despite having paid NJ tax on contributions — the mismatch is less favorable than PA's full exemption.
California: Conforms to federal 401(k) deferral treatment — pre-tax contributions reduce CA taxable income. CA taxes Roth 401(k) contributions as ordinary income in the year contributed (same as federal), but qualified Roth distributions are exempt from CA tax. CA's top rate of 13.3% makes the pre-tax vs. Roth decision especially consequential.
All other states with income taxes: Generally conform to federal 401(k) treatment, mirroring the pre-tax deferral and deferred-taxation-at-distribution structure.
State-mandated retirement programs: California (CalSavers), Illinois (Secure Choice), Oregon (OregonSaves), Colorado (SecureSavings), Connecticut (MyCTSavings), and a growing list of other states require employers without retirement plans to automatically enroll employees in state-run Roth IRA programs. These are IRAs — not 401(k)s — with the $7,500 contribution limit (2026), no employer match requirement, and no pre-tax option. For employees at companies without a 401(k), these programs provide a default savings floor; they don't replace the tax advantages of a true 401(k).
Implementing Regulations
- 26 CFR Part 1 — Income tax regulations (section 1.401(k)-0 through 1.401(k)-6: table of contents, cash or deferred arrangement rules, elective deferral limits, ADP testing, distribution requirements, hardship distributions)
- 26 CFR 1.401(k)-1 — Cash or deferred arrangements (CODAs — defines qualified 401(k) plans, employee election timing, hardship distributions, in-service withdrawals)
- 26 CFR 1.401(k)-2 — ADP test (Actual Deferral Percentage nondiscrimination test ensuring highly compensated employees don't disproportionately benefit; corrective distributions if test fails)
- 26 CFR 1.401(k)-3 — Safe harbor requirements (safe harbor 401(k) designs that bypass ADP/ACP testing through guaranteed employer contributions: matching and nonelective formulas)
Pending Legislation (119th Congress)
As of April 8, 2026, no enacted federal law has displaced the 2026 401(k) contribution limits summarized above. Policy debate continues around retirement-plan access, startup credits, and future SECURE-style expansions, but this page should be read using the current IRS 2026 limit notice unless federal law changes.
Recent Developments
- Nov. 13, 2025: IRS announced the 2026 retirement-plan cost-of-living adjustments via Notice 2025-67. For 2026, the elective-deferral limit rose to
$24,500, the standard catch-up limit rose to$8,000, and the annual-additions limit under§ 415(c)rose to$72,000. - 2026: The SECURE 2.0 enhanced catch-up for workers ages
60-63remains$11,250, creating a higher employee-deferral window than the standard age-50 catch-up. - 2026: Roth 401(k) accounts continue to be exempt from lifetime required minimum distributions for the original owner, a change that first applied beginning in 2024.
- Administrative transition relief remains relevant: The high-wage Roth catch-up mandate added by SECURE 2.0 still depends on IRS implementation guidance and plan-administrator readiness, so higher-income participants should keep checking their employer plan's current treatment of catch-up contributions.