A 401(k) is a defined contribution plan. Employees choose how much of their pay to contribute, and the employer may add matching or other contributions. The IRS sets yearly limits on what can go in, and plans may offer a traditional (pre-tax) option, a Roth option, or both.
Limits (2026)
employee deferral limit = $24,500
total annual additions limit = $72,000 (employee + employer, excluding catch-up)
- Employee deferral limit: the most an employee can contribute from pay.
- Total annual additions limit: the cap on all contributions to the account in a year; it is the lesser of $72,000 or 100% of compensation.
Example
An employee who earns $90,000 and defers 10% contributes $9,000. If the employer matches 4% of salary ($3,600), $12,600 goes into the account for the year, far below both limits. The 401(k) calculator projects the balance over time, using compound interest.
Related rules
Savers aged 50 or older can add a catch-up contribution. Traditional 401(k) balances are eventually subject to required minimum distributions. The full 2026 table is in the 401(k) contribution limits guide.