2026 Contribution Limits at a Glance
| Contribution Type | 2025 Limit | 2026 Limit | Change |
|---|---|---|---|
| Employee contributions (under 50) | $23,000 | $23,500 | +$500 |
| Catch-up (age 50–59 and 64+) | $7,500 | $7,500 | No change |
| Enhanced catch-up (age 60–63, SECURE 2.0) | $11,250 | $11,250 | No change |
| Combined employee + employer total | $69,000 | $70,000 | +$1,000 |
Source: IRS Notice 2025-70. The enhanced catch-up for ages 60–63 was introduced by the SECURE 2.0 Act.
One change worth noting: the SECURE 2.0 Act introduced a higher catch-up limit for people aged 60–63. In 2026, those aged 60–63 can contribute an additional $11,250 (rather than the standard $7,500), bringing their total potential contribution to $34,750.
How Employer Matching Works
Employer matching is one of the most valuable benefits available to employees. A typical match might be "100% of contributions up to 3% of salary" or "50% of contributions up to 6% of salary." Either way, it's free money — an immediate 50–100% return on those dollars before any investment growth.
Employer contributions don't count toward your $23,500 personal limit. They count only toward the combined $70,000 total. So if you contribute $23,500 and your employer adds $8,000 in matching, your combined total is $31,500 — fine under both limits.
Missing the employer match to max out a Roth IRA first is a common mistake. The match is a guaranteed return. No investment reliably beats it. Capture the full match before directing money anywhere else.
Roth vs Traditional 401(k)
Many employers now offer both options within the same plan. The tax mechanics work identically to the IRA comparison:
Traditional 401(k): contributions reduce your taxable income today. You pay income tax on withdrawals in retirement. Good if you're in a high bracket now and expect lower income in retirement.
Roth 401(k): contributions are after-tax — no deduction today, but all qualified withdrawals in retirement are completely tax-free. Good if you're in a lower or middle bracket now, or if you expect tax rates to rise.
Unlike a Roth IRA, there are no income limits on Roth 401(k) contributions. High earners who can't contribute to a Roth IRA can still use a Roth 401(k). From 2024, Roth 401(k) accounts also have no Required Minimum Distributions, matching the advantage Roth IRAs have always had.
Vesting Schedules Explained
Your own contributions to a 401(k) are always 100% yours immediately — if you leave your employer the day after making a contribution, you take that money with you. Employer matching is different.
Most employers apply a vesting schedule to their matching contributions, meaning you only fully own the employer's contributions after working there for a set period. Common schedules:
- Cliff vesting: 0% ownership for 1–3 years, then 100% immediately (e.g., nothing vested until year 3, then fully vested)
- Graded vesting: ownership increases gradually (e.g., 20% per year over 5 years)
- Immediate vesting: all employer contributions are yours immediately — less common but exists
Before leaving a job, check your vesting status. If you're one year away from full vesting, leaving early could mean forfeiting thousands of dollars in employer contributions.
How Much Should You Contribute?
A sensible order of priority for most people:
- Contribute enough to your 401(k) to get the full employer match — this is your highest-priority use of savings dollars.
- Max out a Roth IRA ($7,000 in 2026) if you qualify — better investment options and more flexibility than most 401(k) plans.
- Return to your 401(k) and increase contributions toward the $23,500 limit.
- If you've maxed both, a taxable brokerage account is the next step.
If you can't afford any of these fully, start with whatever you can. Even $50 per month in a 401(k) builds the habit and captures any available employer match.
Workplace Pension Equivalents Globally
UK — Workplace Pension / Auto-Enrolment: Since 2012, UK employers must automatically enrol eligible employees into a workplace pension. The minimum total contribution is 8% of qualifying earnings — at least 3% from the employer, with employees making up the rest. Most employees contribute through NEST, The People's Pension, or their employer's scheme. You can increase contributions above the minimum and benefit from full tax relief at your marginal rate. The annual allowance for pension contributions in 2026/27 is £60,000.
India — EPF (Employees' Provident Fund): Indian salaried employees contribute 12% of basic salary to EPF, with the employer matching 12% (though 8.33% of the employer's share goes to the Employee Pension Scheme). The current EPF interest rate is set annually by the government — it was 8.25% for 2023–24. EPF withdrawals are tax-free after 5 continuous years of service. Details at epfindia.gov.in.
Canada — Group RRSP and DPSP: Canadian employers often offer a Group RRSP with matching contributions. The RRSP contribution limit for 2026 is 18% of prior year earned income, up to $32,490. Some employers offer a Deferred Profit Sharing Plan (DPSP) instead. Like the 401(k), capturing the full employer match is the top priority before other savings decisions.