A 401(k) contribution election is the instruction you give your employer telling payroll how much of each paycheck to route into your retirement account and how those dollars should be taxed. For 2026, you can defer up to $24,500 of your pay, with additional catch-up amounts available once you turn 50.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The election covers three things at once: the amount, the tax bucket, and how the money is invested.
How Much You Can Contribute in 2026
The elective deferral limit under IRC Section 402(g) is $24,500 for 2026. That ceiling covers all traditional and Roth salary deferrals combined across every 401(k), 403(b), and governmental 457 plan you participate in during the year.2Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs Two jobs with separate plans do not give you two separate limits. The $24,500 is yours across both.
Catch-Up Contributions by Age
Starting in the year you turn 50, you can go above the standard limit. Under SECURE 2.0, the catch-up amount now depends on exactly how old you are:
- Age 50 through 59: $8,000 catch-up, for a total of $32,500.
- Age 60 through 63: $11,250 catch-up, for a total of $35,750. This enhanced amount is the greater of $10,000 or 150% of the standard catch-up, indexed for inflation.
- Age 64 and older: $8,000 catch-up, dropping back to the standard amount, for a total of $32,500.
All of these figures are for 2026.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The 60-to-63 window is narrow and easy to miss, so if you fall in that range, adjust your election upward while you can.
The Total Additions Cap
Separate from the deferral limit, IRC Section 415(c) caps everything that goes into your account in a single year: your deferrals, employer matching, employer profit-sharing, and any after-tax contributions. For 2026, that ceiling is the lesser of 100% of your compensation or $72,000. Catch-up contributions do not count against the $72,000, so a participant aged 60 through 63 could theoretically put away as much as $83,250 in a year. The plan can only consider up to $360,000 of your compensation when calculating contributions.2Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs
Choosing the Tax Treatment
Your election also decides how each contribution is taxed. Most plans offer at least two of the three options below.
Traditional (pre-tax) contributions come out of your pay before income tax withholding, lowering the taxable wages in Box 1 of your W-2.3Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 You pay no income tax on those dollars now, but every dollar you eventually withdraw in retirement is taxed as ordinary income. This is the right choice if you expect a lower tax bracket after you stop working.
Roth contributions come out of pay after income taxes are withheld, so your current paycheck sees no tax savings. In exchange, qualified withdrawals in retirement, including all investment growth, come out tax-free. If you expect your tax rate to be higher later, or you want tax-free income in retirement, Roth generally wins.
After-tax (non-Roth) contributions sit in a third bucket some plans allow. Like Roth, they come from after-tax dollars, but the earnings on them are taxed when you eventually withdraw them.4Internal Revenue Service. Retirement Topics – Contributions Their main appeal is that they don’t count against the $24,500 deferral cap, only against the $72,000 total additions cap. Participants who use this bucket often pair it with an in-plan Roth conversion or a rollover to a Roth IRA, moving the after-tax principal into Roth dollars so future growth escapes tax.5Internal Revenue Service. Rollovers of After-Tax Contributions in Retirement Plans Check your plan document before counting on this: it only works if the plan allows both after-tax contributions and in-service distributions or in-plan conversions.
The New Roth Rule for Higher Earners
Starting in 2026, a SECURE 2.0 provision changes how catch-up contributions work for higher-paid employees. If your FICA wages from the employer sponsoring the plan exceeded $150,000 in the prior year, all of your catch-up contributions must go into the Roth bucket. Directing catch-up dollars to a traditional pre-tax account is no longer allowed. The threshold looks at Social Security wages in Box 3 of your W-2 from that specific employer, not household income.
If you earned less than $150,000 in FICA wages from the sponsoring employer, you can still choose traditional or Roth for the catch-up. The rule does not affect your base deferrals up to $24,500, which can go into whichever bucket you prefer regardless of income.
Submitting or Changing Your Election
Most plans handle elections through a website run by the plan’s recordkeeper. You log in, pick a deferral percentage or flat dollar amount, choose the tax treatment, and allocate your contributions across the plan’s investment options. A percentage-based election scales automatically with raises and bonuses. A flat dollar amount gives you tighter control but has to be updated by hand when your pay changes.
The investment allocations must add up to 100%. Skip that step and your contributions typically land in a default fund, often a target-date fund matched to your expected retirement year. That default is usually reasonable but may be more conservative or more aggressive than you would choose.
While you’re in the system, name your beneficiaries. You’ll need each person’s full name, date of birth, and Social Security number. If you’re married and want to name someone other than your spouse as primary beneficiary, most plans require your spouse’s written consent. Skipping beneficiary designations entirely can force your account through probate.
Election changes generally take effect within one or two pay cycles, depending on your company’s payroll cutoff. Some plans allow changes anytime; others restrict updates to specific enrollment windows. After submitting a change, check your next pay stub to confirm the deduction matches. If it doesn’t, contact your plan administrator immediately rather than waiting another pay period. Save every confirmation number the system generates. If a dispute arises later about what you asked for, that documentation is your proof.
Getting the Employer Match Right
Your election directly controls how much matching money you receive. Formulas vary, but common structures include a dollar-for-dollar match on the first 3% or 4% of pay, or a 50-cent match on each dollar up to 6% of pay. If your deferral percentage sits below the match threshold, you leave money behind.
Do the math before you finalize the election. If your plan matches 50% on contributions up to 6% of pay, contributing 3% captures only half the available match. Raising your election to 6% doubles the employer’s contribution at no extra cost to the company. Getting the full match is the single highest-return decision inside a 401(k), because it’s an immediate 50% or 100% return on every dollar.
One quirk worth knowing: employer matching contributions are almost always made on a pre-tax basis, even when your own deferrals go into the Roth bucket. Those matching dollars sit in a separate pre-tax account and are taxed when withdrawn.
If You Were Automatically Enrolled
If your employer set up its 401(k) on or after December 29, 2022, SECURE 2.0 likely requires the plan to automatically enroll you. Under a Qualified Automatic Contribution Arrangement, the default deferral rate starts at a minimum of 3% of pay and increases by at least one percentage point each year until it reaches at least 6%, capped at 10%.6Internal Revenue Service. Retirement Topics – Automatic Enrollment Some plans set the escalation ceiling as high as 15%.
Auto-enrollment means you may already be contributing without having made an active choice. If the default rate or default fund isn’t what you want, submit your own election to override it. You can also opt out entirely, though doing so usually costs you the employer match. Plans that existed before the SECURE 2.0 cutoff date are not required to auto-enroll, though many do.
Fixing an Over-Contribution
If you exceed $24,500 in a single year, most often because you contributed at two employers or payroll didn’t stop deductions in time, act fast. You must notify the plan and receive a corrective distribution of the excess plus its earnings no later than April 15 of the following year. Filing an extension on your tax return does not extend this deadline.7Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan
If the excess comes back by April 15, you include the excess deferral in your taxable income for the year it was contributed, but the corrective distribution itself is not taxed again. The earnings portion is taxed in the year distributed. No early withdrawal penalty applies to a timely correction.8Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
Miss the April 15 deadline and the excess gets taxed in the year you contributed it and again when it eventually leaves the plan. That’s genuine double taxation with no workaround. Late distributions may also trigger the 10% early withdrawal penalty and mandatory 20% withholding.9Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g) Track your year-to-date deferrals yourself if you switch jobs mid-year. Your new employer’s payroll has no visibility into what you contributed at the old one.
If Your Employer Never Processed Your Election
Sometimes the mistake isn’t yours. If you submitted a valid election and payroll never implemented it, missed deferrals never made it into the market on your behalf. The IRS requires the employer to fix this with a corrective contribution equal to 50% of the missed deferral amount, based on your actual election percentage.10Internal Revenue Service.